Crude oil rose for a second day hitting 74.84 as Iran successfully tested a medium-range missile. Oil extended earlier gains after the Obama administration said Iran’s test of the upgraded missile undermines the country’s claim of peaceful intentions.

Crude oil for January delivery rose 93 cents, or 1.3 percent, to $71.62 a barrel at 10:09 a.m. on the New York Mercantile Exchange. Earlier, futures touched $71.82, the highest since Dec. 9. Oil has climbed 61 percent this year.

Developments in the Middle East and North Korea argue that the security premium is coming back into the price of oil. Oil actually started to increase even before the report that estimated a decline in U.S. crude inventories for last week.

Stockpiles probably declined by 2 million barrels in the week ended Dec. 11, from 336.1 million the prior week, according to the median of 17 estimates.

It is worth to mention that the U.S. housing starts rose 8.9 percent in November, in a sign of a continuing economic recovery that may boost energy demand.

The market is also waiting for the Fed decision and the Interest-rate futures indicated traders pared bets on Wednesday that the Federal Reserve will increase its target rate by mid-2010 as the Federal Open Market Committee holds its last meeting of the year.

While widely expected to keep the target fed funds rate at a current range of zero to 0.25%, analysts are looking for any signal when rates may increase. The August 2010 fed funds contract indicated traders expect rates to rise to 0.48% by then, down slightly from Tuesday and compared to a 0.60% rate after the last Fed meeting in November.

Futures for December 2010 show traders expect the benchmark rate to be 0.89% by then, compared to 0.93% on Tuesday. The Fed typically changes rates in 0.25-point increments, but futures contracts settle at the average rate fed funds traded at for the month.