BLBG: Oil Rises for the First Day in Six as Dollar Drop Spurs Buying
By Ann Koh and Ben Sharples
Jan. 19 (Bloomberg) -- Crude oil rose for the first time in six days as the dollar weakened and some investors took the view a drop below $79 a barrel made futures attractive to buy.
Oil snapped its longest decline since December as the U.S. currency fell to a four-week low against the yen, increasing the appeal of commodities as an alternative investment. Crude also gained on a report yesterday China’s imports may rise 15 percent this year as the second-largest energy consumer starts building the second phase of its strategic oil reserves.
“On the upside is improved economic headlines from U.S. and China,” said Gordon Kwan, the head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong. “Oil will be trading in the range between $79 to $83, I don’t see it breaking through until we have better visibility on how strong the economic recovery is going to be.”
Crude oil for February delivery climbed as much as 68 cents, or 0.9 percent, to $78.68 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.24 at 1:58 p.m. Singapore time. Futures dropped 5.7 percent last week, the first weekly decline in five, after U.S. fuel supplies rose. Yesterday’s trades will be combined with today’s because of the Martin Luther King Jr. holiday in the U.S.
February futures, which settled at $78 a barrel Jan. 15, expire tomorrow. The more widely traded March contract gained as much as 66 cents, or 0.8 percent, to $79.03.
“Given the outlook for demand and given what’s happened with supply there is always going to be investors willing to buy in around the mid- to high-$70s,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “That is what you’re seeing today, a little bit of buying on weakness.”
Dollar Weakness
The dollar fell before reports this week that may show U.S. building permits rose at a slower pace and manufacturing in the Philadelphia region fell, prompting speculation the Federal Reserve will keep interest rates near zero to sustain economic growth.
The U.S. currency traded at 90.44 yen as of 2:24 p.m. in Tokyo from 90.78 yesterday in New York, after slipping to 90.35, the lowest since Dec. 21. It was little changed against the euro after rising to $1.4384 yesterday.
“A softer U.S. dollar provides some support to prices,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “The oil market needs some real hard supply-demand indications to really forge ahead in 2010.”
Qatar’s Energy Minister Abdullah bin Hamad al-Attiyah said yesterday the Organization of Petroleum Exporting Countries probably won’t raise output this year because the market is sufficiently supplied.
OPEC Supply
OPEC, responsible for about 40 percent of global oil supply, started a record production cut late in 2008 in response to the sharpest demand drop since the 1980s. The group’s adherence to output targets has since waned as consumption revives and prices gain. OPEC is scheduled to meet March 17 in Vienna.
Temperatures in the U.S. northeast, which consumes four- fifths of the country’s heating oil, will probably be above normal through Jan. 28, according to the National Weather Service. Oil rallied 4.3 percent in the first 10 days of 2010 as demand for heating fuels climbed during a cold snap.
Brent crude oil for March settlement rose as much as 19 cents, or 0.3 percent, to $77.29 a barrel on the London-based ICE Futures Europe exchange. It was at $77 at 1:54 p.m. Singapore time.
To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net
