BLBG: Crude Oil Trades Near $73 on Signs of Global Economic Recovery
By Yee Kai Pin and Gavin Evans
Dec. 21 (Bloomberg) -- Crude oil traded near $73 a barrel in New York after rising last week amid optimism global demand will increase as the world economy recovers from its worst recession since World War II.
Oil prices may gain this week on expectations that increasing fuel demand in the U.S., the world’s largest energy consumer, will reduce inventories, according to a Bloomberg News survey. Reports this week are forecast to show increasing sales of existing and new homes in the country.
“If the sentiment around demand recovery continues to improve I’d see upward support for oil prices,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd., said in Melbourne. “But an oversupply problem overshadows the market, and it’s hard to see oil pushing much higher.”
Crude oil for January delivery was at $73.41 a barrel, up 5 cents, in electronic trading on the New York Mercantile Exchange at 12:09 p.m. Singapore time. The contract, which expires today, rose 1 percent to $73.36 on Dec. 18, the highest settlement since Dec. 7. Futures climbed 5 percent last week, the most in two months, and have gained 65 percent this year.
Prices had jumped after Iranian troops occupied an oil field in a disputed border region with Iraq. The troops withdrew from the al-Fakah well in the East Maysan field late Dec. 19 after an armed confrontation, Iraq’s deputy minister of oil Abdul Kareem al-Luaibi said yesterday. Separately, Iraqi television cited government spokesman Ali Al-Dabbagh as saying Iranian soldiers remained in Iraqi territory.
U.S. Snowstorm
Washington began digging out from its biggest December snowfall in more than seven decades as cities from Philadelphia to Boston dealt with mounds of snow and slushy messes left behind by the storm. The U.S. northeast is the world’s largest heating oil market.
Crude oil for February delivery, the most actively traded contract, climbed as much as 45 cents, or 0.6 percent, to $74.87 a barrel. It has risen above its 100-day moving average, according to Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo.
“Technically, we can see some short-covering,” he said. “That’s supporting this market at the moment.”
Short-covering is the buying of securities or commodities to close bets that prices will fall.
OPEC Meeting
The Organization of Petroleum Exporting Countries won’t reconsider or review production quotas at tomorrow’s meeting in Luanda, Angola, according to Iraq’s Oil Minister Hussain al- Shahristani.
Iraq is calling for stricter compliance with output targets, al-Shahristani said in an interview yesterday. The 12-member group pumps about 40 percent of the world’s oil.
Brent crude oil for February settlement rose as much as 57 cents, or 0.8 percent, to $74.32 a barrel on the London-based ICE Futures Europe exchange. The contract was at $74.17 a barrel at 12:09 p.m. Singapore time.
Iraq shut its northern export pipeline to Turkey for the third time in two months after an explosion damaged the link. The pipeline connecting the Ceyhan oil export terminal was sabotaged around 8:30 p.m. local time Dec. 19, Oil Ministry spokesman Asim Jihad said. The New York Times reported the pipeline capacity at 450,000 barrels a day, which would be about 23 percent of Iraq’s exports.
“There may be some interruption to supply, but everyone understands that stock levels at the moment are enough compared with demand,” said Hasegawa at Newedge. “There’s no supply shortage in the near future.”
In Nigeria, the country’s main rebel group claimed its first assault on oil infrastructure in five months. The Movement for the Emancipation of the Niger Delta said Dec. 19 it attacked a pipeline in Abonemma, in the southern oil region, used by Royal Dutch Shell Plc and Chevron Corp.
Japan, Asia’s second-largest buyer of oil, boosted crude imports in November for the first time in 13 months as demand began to rebound. The country imported 17.8 million kiloliters last month, or 3.73 million barrels a day, up 0.4 percent from a year earlier, according to a preliminary finance ministry report released in Tokyo today.
Heating oil for January delivery on the New York Mercantile Exchange rose as much as 1.25 cents, or 0.6 percent, to $1.9692 a gallon.
To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Yee Kai Pin in Singapore at kyee13@bloomberg.net
