BLBG: Oil Little Changed as Weaker Dollar Offsets China Concerns
By Grant Smith
Jan. 25 (Bloomberg) -- Crude oil traded little changed in New York as the declining dollar tempered selling driven by concerns that China will raise interest rates.
Oil recovered from a near-one-month low as equity markets rose and the weaker U.S. currency heightened the appeal of dollar-priced assets for hedging inflation. OPEC nations must improve their compliance with the group’s output quotas to prevent further pressure on oil prices, Shokri Ghanem, chairman of Libya’s National Oil Corp., said yesterday.
“With OPEC ready to act if there’s further weakening, I think prices may be nearing a bottom,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “Weakness in the stock markets and the prospects of monetary tightening in China helped trigger the exit of some speculative money.”
Crude for March delivery was at $74.82 a barrel, up 28 cents, in after-hours electronic trading on the New York Mercantile Exchange at 11:35 a.m. in London. Earlier the contract fell as much as 43 cents to $74.11. Futures dropped 2 percent to $74.54 on Jan. 22, the lowest settlement since Dec. 22.
Brent oil for March settlement climbed as much as 67 cents, or 0.9 percent, to $73.50 a barrel on the London-based ICE Futures Europe exchange. It was at $73.36 a barrel, up 53 cents, at 11:35 a.m., having fallen 2.4 percent to $72.83 on Jan. 22.
U.S. stock-index futures gained on signs Ben S. Bernanke will be confirmed as Federal Reserve chairman for a second term. The dollar declined 0.2 percent to $1.4189 per euro as of 11:07 a.m. in London.
Oil at $95
Morgan Stanley forecast that oil futures will climb to $95 a barrel before the end of the year as consumption picks up.
Prices in New York slumped 4.9 percent last week as U.S. gasoline stockpiles reached a 22-month high, equities and commodities tumbled on the nation’s plans for new banking restrictions, and investors fretted that China will raise interest rates to slow growth in the world’s second-largest energy consumer.
China “brought the focus back to still-weak demand from a lot of the advanced economies,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “If we do see equities continue their sell-off this week, that would certainly suggest that oil could follow.”
The Sabine Neches Waterway, the Texas ship channel serving four refineries that process about 6.5 percent of total U.S. capacity, remained closed indefinitely after a collision between a tanker and vessel spilled about 11,000 barrels of oil, the U.S. Coast Guard said.
Fuel Stockpiles
Four refineries around the waterway have a combined processing capacity of 1.15 million barrels of oil a day.
New York oil futures reached a 15-month high of $83.95 a barrel on Jan. 11 as rising equity markets emboldened investors and traders speculated freezing temperatures in Europe and the U.S. would help draw down above-average distillate supplies.
Prices plunged 10 percent during the past two weeks as U.S. fuel stockpiles and temperatures rose, China increased reserve requirements for its banks, and the Standard & Poor’s 500 Index fell to a seven-week low.
Hedge-fund managers and other large speculators reduced their bets on rising oil prices for the first time in five weeks, according to U.S. Commodity Futures Trading Commission data.
Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 1 percent to 134,381 contracts in the week ended Jan. 19, the U.S. Commodity Futures Trading Commission said last week. Positions a week earlier were the highest in at least 27 years.
To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net
