BS: Oil Trades Near Two-Week Low as Equities Dull Demand Optimism
Dec. 17 (Bloomberg) -- Oil traded near its lowest in two weeks as retreating equity indexes countered signs that the economic recovery is eroding surplus fuel inventories.
Oil erased gains as the Stoxx Europe 600 Index slipped. The commodity earlier rose as much as 0.8 percent after the Labor Department said yesterday that applications for unemployment insurance dropped to the lowest in three weeks. U.S. crude inventories fell the most since May 2008 last week, according to the Energy Department.
“The physical market is tightening a little bit with the colder temperatures,” said Tobias Merath, head of commodities at Credit Suisse Group in Zurich. “But looking further into the future, inventories are still high, so I don’t know much further upside there is. Prices will remain around $90.”
Crude for January delivery traded for $87.48 a barrel, down 25 cents on the New York Mercantile Exchange at 11:24 a.m. London time, after increasing as much as 67 cents to $88.37. Brent crude for February settlement was down 16 cents at $91.44 a barrel after rising as high as $92.15 on the ICE Futures Europe exchange in London.
Yesterday, crude fell 1 percent in New York to $87.70, the lowest settlement since Dec. 1. Futures have gained 0.5 percent this week after losing 1.6 percent last week. The January contract expires Dec. 20.
Price Decline
Oil may decline next week on speculation the U.S. Energy Department will report an increase in supplies after the biggest drawdown in more than eight years in this week’s data.
Eighteen of 34 analysts and traders, or 53 percent, forecast crude will fall through Dec. 23. Nine respondents, or 26 percent, predicted prices will climb and seven estimated there will be little change. Last week, 46 percent of survey respondents forecast the market would drop.
“People are saying the economy is picking up, and if that is the point, it should lead to either higher demand for crude, or the U.S. dollar trading higher as people get more confident,” said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
U.S. crude stockpiles fell 9.85 million barrels in the week ended Dec. 10 to 346 million, according to the Energy Department. That’s the biggest decrease since May 2008.
U.S. applications for jobless-insurance payments fell to 420,000, the Labor Department said. Economists had projected a median increase in claims to 425,000, based on a Bloomberg News survey. Builders in November began work on more homes for the first time in three months. Housing starts rose to a 555,000 annual rate last month, up 3.9 percent from October, Commerce Department data showed yesterday.
The euro advanced against the dollar for a second day as European Union leaders agreed to create a mechanism to contain future debt shocks and the European Central Bank armed itself with more capital. The 16-nation currency rose as much as 0.9 percent to $1.3359, from $1.3244 in New York yesterday.
--With assistance from Yee Kai Pin and Ann Koh in Singapore. Editors: John Buckley, Raj Rajendran
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
