BLBG: Oil Rises From One-Month Low on Speculation Demand to Increase
By Christian Schmollinger and Gavin Evans
Nov. 16 (Bloomberg) -- Crude oil rose from a one-month low on speculation demand will increase as the global economy recovers from its worst recession since World War II.
Oil also rose as the dollar fell, increasing the investments in commodities and pushing up the price producers must seek to maintain purchasing power. A report today in the U.S., the world’s largest energy user, will probably show New York manufacturing expanded for a fourth month in October, based on the median estimate in a Bloomberg survey of economists.
“Even with the dollar near 15-month lows there is still more room to the downside and crude has more room to the upside,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “As long as Asia is doing well and Europe and the U.S. aren’t doing terribly, the risk trade is going to continue and that will push crude up and the dollar down.”
Crude oil for December delivery rose as much as $1.04, or 1.4 percent, to $77.39 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $77.29 at 2:06 p.m. in Singapore.
The contract fell 59 cents to $76.35 a barrel on Nov. 13, the lowest settlement since Oct. 14, after an unexpected decline in U.S. consumer confidence. Prices fell 1.4 percent last week as jobless claims in the world’s largest economy increased, fuel stockpiles rose and the nation’s refiners reduced operating rates to a 13-month low.
Weak Dollar
Oil “has been a trade based on the recovery story and that hasn’t changed,” said Toby Hassall, a research analyst with CWA Global Markets in Sydney. “The weakness in the U.S. dollar should remain a pretty supportive factor.”
Crude has gained 73 percent this year and reached a 12- month high of $82 on Oct. 21. The euro has gained about 6.4 percent over the same period, and climbed to as much as $1.4967 today from $1.4903 late in New York last week.
Oil’s “pre-emptive” rally has been affirmed by the return to growth in Europe and recent data from the U.S. and China, Hassall said. The U.S. recovery appears “uneven” and more consistent data may be needed for oil to push higher.
“We’re more likely to break lower out of this range than to break higher, at least in the short-term,” he said. “I don’t see a huge amount of downside for oil.”
OPEC Meeting
The Organization of Petroleum Exporting Countries won’t increase its output quotas when it meets in December, Qatar’s Energy Minister Abdullah bin Hamad al-Attiyah told Bloomberg News in Tokyo today.
“I don’t think that we will take any decision to increase production,” he said.
OPEC, producer of more than 40 percent of the world’s crude oil, will meet on Dec. 22 in Luanda, Angola, to discuss output targets after agreeing to leave them unchanged at the last three meetings. The group’s compliance with the production cuts slipped to 60 percent in October from 62 percent in September, it said in a report on Nov. 11.
Production from the 11 members excluding Iraq that are bound by the targets rose by 50,000 barrels a day to 26.52 million barrels a day from September.
“OPEC is unlikely to do anything formally about the quotas unless prices get over $100,” said Dominick Chirichella, a senior partner at the Energy Management Institute. “They will put more oil on the market through lower compliance rates.”
CFTC Report
Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended Nov. 10, according to U.S. Commodity Futures Trading Commission data.
Net-long positions fell by 15,772 contracts, or 15 percent, from a week earlier. Overall speculative long positions, or bets prices will rise, still outnumbered short positions by 88,045 contracts on NYMEX, the Washington-based commission said in its Commitments of Traders report.
Brent crude for January settlement rose 84 cents, or 1.1 percent, to $77.15 a barrel on the London-based ICE Futures Europe exchange. It dropped 46 cents, or 0.6 percent, to $76.31 a barrel on Nov. 13. The December contract expired the same day, falling 47 cents, or 0.6 percent, to $75.55.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Gavin Evans in Wellington at gavinevans@bloomberg.net.
