BLBG: Oil Rises From a Two-Month Low as Investors Buy at Below $70
By Ann Koh and Ben Sharples
Dec. 15 (Bloomberg) -- Oil recouped some of the losses from its longest losing streak in eight years as investors viewed a drop below $70 a barrel as a buying opportunity.
Crude rose from its lowest in more than two months amid falling industrial output in Europe and the smallest improvement this year in consumer confidence in Japan, the third-largest oil-consuming country. A report from the U.S. Federal Reserve today will likely show industrial output grew in November, adding to signs that the U.S. recovery is gaining momentum.
“In the new year, investors are going to start to reload, and therefore we can expect that right now is a good buy opportunity,” Victor Shum, a senior principal at consultants Purvin & Gertz Inc., said in a Bloomberg Television interview in Singapore. “I expect pricing to average $80 a barrel in 2010.”
Crude oil for January delivery gained as much as 40 cents, or 0.6 percent, to $69.91 in electronic trading on the New York Mercantile Exchange. It was at $69.72 at 3:25 p.m. in Singapore. Yesterday, the contract fell 36 cents to $69.51 in a ninth day of decline, the longest losing streak since July 2001 and the lowest settlement since Sept. 29. Prices have gained 56 percent this year.
European industrial output dropped for the first time in six months in October, led by a slump in consumer goods. European employment declined in the third quarter. The Tankan business confidence index in Japan showed large companies planned deeper spending cuts to protect earnings under threat from the yen, which climbed to a 14-month high against the dollar in November.
“The industrial production numbers reiterate that the demand outlook is not particularly rosy in Europe,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said by telephone. “The fundamentals are really weak, it seems like people have lost a bit of faith.”
‘Slow Recovery’
Prices have fallen because of a “slow recovery” in demand in developed markets, according to a Goldman Sachs Group Inc. report yesterday. Oil has dropped 11 percent since Dec. 1 in the longest decline since July 2001.
“I’d expect it to move above $70 but if the sentiment continues to be bearish then you could see further diversifying out of oil,” Westmore said. “Depending on what happens with the U.S. dollar it could sink a little lower.”
Prices are “very suitable,” between $70 and $80 a barrel, and it’s unlikely that the Organization of Petroleum Exporting Countries will change its output levels when it meets next week in Angola, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said yesterday in Kuwait City.
U.S. oil inventories probably fell 2 million barrels last week from 336.1 million barrels in the week ended Dec. 4, based on the median estimate of 10 analysts surveyed by Bloomberg News, all of whom predicted a decline. Supplies are 4.8 percent higher than a year ago.
Refinery utilization probably increased by 0.4 percentage point to 81.5 percent, the survey showed.
Brent crude oil for January settlement gained as much as 29 cents, or 0.4 percent, to $72.18 a barrel on the London-based ICE Futures Europe exchange. Yesterday, the contract gained 1 cent to $71.89 a barrel.
To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net
