BLBG: Oil Rises to Seven-Week High as Global Demand Is Revised Higher
Oct. 13 (Bloomberg) -- Crude oil rose to a seven-week high in New York on speculation world demand will grow as the economy rebounds and as a weaker dollar spurs demand for commodities.
The Organization of Petroleum Exporting Countries increased its 2010 global oil-consumption forecast by 200,000 barrels a day on expansion in emerging economies. Oil gained as much as 1.6 percent and gold climbed to a record as the dollar dropped to the lowest level against the euro since before the bankruptcy of Lehman Brothers Holdings Inc.
“Prices are higher in anticipation of higher demand,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We have yet to see demand recover, but as long as there are upward revisions of future demand, there will support for prices.”
Crude oil for November delivery rose 26 cents, or 0.4 percent, to $73.53 a barrel at 9:49 a.m. on the New York Mercantile Exchange. Futures reached $74.47, the highest since Aug. 25. Prices are up 65 percent this year.
The slumping dollar heightened the appeal of energy and metals as an inflation hedge. The U.S. currency depreciated 0.4 percent to $1.4826 per euro, from $1.4773 yesterday, after trading at $1.4876, the weakest level since Aug. 22, 2008.
“Oil is getting most of its cues from outside markets and not from what’s happening in the energy sector,” said Phil Flynn, vice president of research at PFGBest in Chicago. “We are focused on $75 right now. If we don’t take it out in the next couple days, it will show that we are still stuck in a trading range.”
Price Range
Crude oil has traded between $65.05 and $75 since Aug. 1. If prices rise above $75, the next resistance will be at $76.20, according to technical analysis by Auerbach Grayson, a brokerage in New York.
“A breakthrough to the upside instills confidence in further price increases and only adds to the bullish momentum,” said Richard Ross, a technical analyst at Auerbach Grayson.
OPEC, responsible for about 40 percent of worldwide oil supply, predicts that total crude consumption will increase by 700,000 barrels a day to 84.93 million barrels a day next year, led by demand from emerging markets.
Goldman Sachs Group Inc. stood by its forecast for oil to reach $85 a barrel by the end of this year on “modest” improvements in global consumption in the fourth quarter.
‘Robust’ Indicators
“Chinese activity indicators remain robust,” Goldman analysts led by Allison Nathan said in a report today. “We continue to forecast rising oil prices and returns later this year and into 2010.”
An Energy Department report is forecast to show that U.S. crude-oil and gasoline inventories increased last week. The department is scheduled to release its Weekly Petroleum Status Report Oct. 15 at 11 a.m. in Washington, a day later than usual because of yesterday’s Columbus Day holiday.
Brent crude oil for November settlement gained 45 cents, or 0.6 percent, to $71.81 a barrel on the London-based ICE Futures Europe exchange. Futures touched $72.83, the highest level since Aug. 31.
To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net
