BLGB: Crude Oil Poised for Fourth Week of Gains on Economic Recovery
By Ann Koh
Oct. 23 (Bloomberg) -- Crude oil traded above $81 a barrel in New York, poised for a fourth week of gains, on improved prospects for an economic recovery in the U.S., the world’s biggest energy consumer.
Oil has advanced 4 percent this week as equities gained on better-than-estimated company earnings, boosting speculation that the worst recession since the 1930s is over. Prices also increased as the dollar declined against the euro this week, adding to the appeal of commodities as an alternative investment.
“On the economic recovery, it’s three steps forward one step back, an uneven recovery but the worst is over,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities in Hong Kong. “We are seeing more recovery in areas dedicated to exports to China. The structural trend for oil is still up.”
Crude oil for December delivery rose as much as 59 cents, or 0.7 percent, to $81.78 a barrel in electronic trading on the New York Mercantile Exchange and was at $81.57 a barrel, up 38 cents, at 1:39 p.m. Singapore time. Yesterday, the contract fell 18 cents to settle at $81.19. Prices have climbed 83 percent this year.
The MSCI Asia Pacific Index has climbed 34 percent this year, and is headed for its biggest annual increase since 2003, as earnings reports from Australia to Japan boosted speculation that rising demand will help the global economy exit from recession. The Standard & Poor’s 500 Index gained 1.1 percent, while the Dow Jones Industrial Average rose 1.3 percent.
“As we enter the tail-end of the U.S. reporting season, you can look back and say that the report card was better than expected,” said Mark Pervan, a senior commodity strategist at ANZ Banking Group Ltd. in Melbourne.
Analyst Survey
Crude futures may fall next week on concern that U.S. inventories are sufficient to meet weakening demand, according to a Bloomberg News survey of 36 analysts.
Eighteen analysts, or 50 percent, said oil will drop through Oct. 30. Twelve respondents, or 33 percent, forecast that the market will rise and six said prices will be little changed.
Crude oil stockpiles rose 1.31 million barrels to 339.1 million last week, the U.S. Energy Department said in a report Oct. 21. The gain left inventories 9.4 percent above the five- year average for the period. Fuel demand dropped 1.4 percent to an average of 18.7 million barrels a day during the week ended Oct. 16, the DOE said.
“For the sake of the bulls, this better turn out to indeed be one of the coldest winters of the decade,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania, in a note.
Weaker Dollar
The dollar traded at $1.5019 per euro at 1:46 p.m. in Singapore. It earlier reached $1.5060, the weakest since August 2008.
Oil dropped 0.2 percent yesterday on speculation the Organization of Petroleum Exporting Countries members will agree to increase production at a December meeting. OPEC may raise output to keep oil in a range of $75 to $80 a barrel, Secretary- General, Abdalla El-Badri said in London. The 12-member group last agreed to increase targets in September 2007.
An increase in OPEC’s production will depend on prices remaining at $75 to $80 a barrel, as well as on stockpiles returning to the five-year average and the elimination of floating storage, El-Badri told reporters in London.
The 12-member group will meet on Dec. 22 in Luanda, Angola, to review output targets.
OPEC accounts for about 40 percent of the world’s oil production. OPEC members agreed in September 2008 that the 11 countries with quotas would trim output by 4.2 million barrels a day to 24.845 million. Iraq is exempt from the quota system.
Brent crude oil for December settlement rose as much as 64 cents, or 0.8 percent, to $80.15 on the London-based ICE Futures Europe exchange and traded at $79.98 a barrel at 1:46 p.m. Singapore time. Yesterday, the contract declined 18 cents to settle at $79.51.
