By Grant Smith Dec. 31 (Bloomberg) -- Crude oil traded little changed, heading for its biggest annual gain since 1999 as shrinking U.S. crude stockpiles bolstered confidence that demand is recovering. Oil settled at a six-week high yesterday on concern unrest in Iran may disrupt supplies from the second-largest producer in the Organization of Petroleum Exporting Countries. U.S. crude oil inventories fell a fourth week to the lowest since January, while supplies of distillates such as heating fuel dropped for a third week, Energy Department data showed yesterday. “The proximity to $80 is attracting more speculators,” said Eugen Weinberg, an analyst with Commerzbank AG in Frankfurt. “Events in Iran are also increasing the geopolitical premium. But I think prices are inflated at these levels and we’ll see a drop in early January.” Crude oil for February delivery was at $79.38 a barrel, 10 cents higher, on the New York Mercantile Exchange in electronic trading as of 1:43 p.m. London time. It earlier rose as much as 70 cents, or 0.9 percent, to $79.98. Futures, in the longest winning streak since October, are set for a 78 percent advance this year, having tripled over the past decade. Prices dropped this year to as low as $32.70 a barrel on Jan. 20 as the recession reduced demand and reached $82 on Oct. 21, partly because a weaker dollar bolstered the investment appeal of commodities, including gold. Last year, oil touched a record $147.27 a barrel. Rise Next Year Crude may rise 37 percent in 2010 to an average $85 a barrel, from about $62 this year, commodities research analysts at Barclays Capital, led by Paul Horsnell, said in a report yesterday. Weather in the south and east of the U.S. will be “predominantly cold” in the next 11 days to 15 days, MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland, said yesterday. “Commodities are still going to be the place to be,” said Gavin Wendt, an analyst at Mine Life Resources in Sydney. “The anticipation of a pick-up in U.S. oil demand is going to be a big factor that will come into play in 2010. On top of that, you have uncertainty with respect to Iran in particular.” Iran has detained about 1,000 people since protests erupted Dec. 27 in Tehran and other cities, according to the New York- based International Campaign for Human Rights in Iran. The disputed June re-election of President Mahmoud Ahmadinejad has sparked the country’s most severe unrest since the overthrow of the Shah in the 1979 Islamic Revolution. Iran Demonstrations Iran has accused Western countries of inciting the latest demonstrations. Yesterday, crowds of government supporters massed in Tehran, some calling for the death of opposition leaders, as police warned they will crush any further anti- regime protests. OPEC, responsible for about 40 percent of the world’s oil supply, increased output this month, according to Bloomberg data, as rising prices encouraged members to pump more crude. The 11 OPEC members bound by quotas boosted supplies by 115,000 barrels a day to 26.615 million a day. U.S. crude oil inventories dropped 1.54 million barrels to 326 million in the week to Dec. 25, Energy Department data showed yesterday. Distillate fuel and gasoline supplies also declined. Companies in the U.S. expanded more than expected in December as orders and employment grew, the Institute for Supply Management-Chicago Inc. said yesterday. The group’s business barometer rose to 60, the highest level since January 2006, from 56.1 in November. Readings above 50 signal expansion. Price Survey Oil may rise next week on cold weather and concern over the unrest in Iran, according to a Bloomberg News survey. Twelve of 27 analysts and traders, or 44 percent, said futures will climb through Jan. 8. Eight respondents, or 30 percent, forecast the market will drop and seven said prices will be little changed. Last week, 48 percent of survey respondents predicted oil would gain. Brent crude oil for February settlement rose 5 cents to $78.08 a barrel on the London-based ICE Futures Europe exchange as of 1:44 p.m. local time. It earlier climbed as much as 91 cents, or 1.2 percent, to $78.94. To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

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