BLBG: Oil Rises a Seventh Day, Set for Biggest Annual Gain in Decade
By James Paton and Yee Kai Pin
Dec. 31 (Bloomberg) -- Crude oil rose for a seventh day as colder weather in the U.S. increased demand for heating fuels. Prices are poised for the biggest annual gain since 1999 on optimism consumption will rebound as the global economy recovers.
Oil settled at a six-week high yesterday on concern unrest in Iran may disrupt supplies from the second-largest producer in the Organization of Petroleum Exporting Countries. Signs the U.S. economy is rebounding from the worst recession since World War II also boosted prices.
“Oil prices should keep on pushing higher,” Justin Smirk, a senior economist at Westpac Banking Corp. in Sydney, said by mobile phone today. “The market will be volatile, with periods of disappointment, but at the end of next year we should see oil prices higher than what they are now.”
Crude oil for February delivery rose as much as 57 cents, or 0.7 percent, to $79.85 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $79.54 at 1:40 p.m. Singapore time. Futures, in the longest winning streak since October, are set for a 78 percent advance this year, having tripled over the past decade.
Prices dropped to as low as $32.70 a barrel Jan. 20 as the recession reduced demand and reached $82 on Oct. 21, partly because a decline in the dollar bolstered the investment appeal of commodities, including gold. Last year, oil touched a record $147.27 a barrel.
Crude may rise 37 percent in 2010 to an average $85 a barrel, from about $62 this year, commodities research analysts at Barclays Capital, led by Paul Horsnell, said in a report yesterday.
Cold Weather
Weather in the U.S. south and east regions will be “predominantly cold” in the next 11 days to 15 days, MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland, said yesterday.
Heating oil futures in New York have risen 5 percent this month on forecasts for colder temperatures. The contract for January delivery, which expires today, traded at $2.12 a gallon, up 1.07 cents, or 0.5 percent, at 9:37 a.m. in Singapore.
“Commodities are still going to be the place to be,” said Gavin Wendt, an analyst at Mine Life Resources in Sydney. “The anticipation of a pick-up in U.S. oil demand is going to be a big factor that will come into play in 2010. On top of that, you have uncertainty with respect to Iran in particular.”
Iran has detained about 1,000 people since protests erupted Dec. 27 in Tehran and other cities, according to the New York- based International Campaign for Human Rights in Iran. The disputed June re-election of President Mahmoud Ahmadinejad has sparked the country’s worst unrest since the overthrow of the Shah in the 1979 Islamic Revolution.
Iran Unrest
Iran has accused Western countries of inciting the latest demonstrations. Yesterday, crowds of government supporters massed in Tehran, some calling for the death of opposition leaders, as police warned they will crush any further anti- regime protests.
OPEC will cut oil shipments for the first time in two months in the four weeks ending Jan. 9, to 22.89 million barrels a day, according to Oil Movements, a Halifax, England-based consultant. The 12-member group pumps about 40 percent of the world’s oil.
U.S. crude oil inventories fell a fourth week to the lowest since January, Energy Department data showed yesterday. Commercially held stockpiles dropped 1.54 million barrels to 326 million in the week to Dec. 25. Distillate fuel and gasoline supplies also declined.
Companies in the U.S. expanded more than expected in December as orders and employment grew, the Institute for Supply Management-Chicago Inc. said yesterday. The group’s business barometer rose to 60, the highest level since January 2006, from 56.1 in November. Readings above 50 signal expansion.
Price Survey
Oil may rise next week on cold weather and concern over the unrest in Iran, based on a Bloomberg News survey.
Twelve of 27 analysts and traders, or 44 percent, said futures will climb through Jan. 8. Eight respondents, or 30 percent, forecast the market will drop and seven said prices will be little changed. Last week, 48 percent of survey respondents predicted oil would gain.
Brent crude oil for February settlement climbed as much as 71 cents, or 0.9 percent, to $78.74 a barrel on the London-based ICE Futures Europe exchange. It was at $78.48 at 1:40 p.m. Singapore time.
To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; James Paton in Sydney jpaton4@bloomberg.net
