BLBG: Oil Rebounds From 2-Month Low on Speculation Drop Was Too Fast
By Grant Smith
Dec. 10 (Bloomberg) -- Crude oil rose, rebounding from a two month-low near $70 a barrel on speculation that this week’s decline took place too rapidly.
Oil had lost almost 10 percent in six days as a stronger dollar dampened investor appetite for commodities to hedge against inflation and climbing U.S. fuel inventories undermined confidence demand is recovering. Gasoline stockpiles jumped 2.25 million barrels last week, the Energy Department said yesterday.
“The low $70s is definitely seen as a buying region for a lot of investors,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said by telephone. “If you’ve got any faith in the medium-term demand outlook, then it’s probably not a bad time to buy.”
Crude oil for January delivery advanced as much as 58 cents, or 0.8 percent, to $71.25 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $71.21 at 11:36 a.m. London time.
Yesterday, oil fell for a sixth day, dropping 2.7 percent to $70.67 a barrel, the lowest settlement since Oct. 7, after an Energy Department report showed gasoline stockpiles rose to 216.3 million barrels, the highest since mid-April. Refineries operated at a six-week high of 81.1 percent of capacity, up 1.4 percentage points from the previous week.
“The gasoline data and refiner utilization are indicating there is a little more pumping occurring, but the consumption side of the equation is not there,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “The market is waiting for that consumption to kick. It just doesn’t look like it’s as strong as what people think.”
Crude Inventories
Crude oil inventories fell 3.82 million barrels to 336.1 million in the week to Dec. 4, a five-week low, the Energy Department report showed. A 250,000-barrel gain was forecast.
The dollar traded at $1.4746 against the euro at 11:37 a.m. in London, from $1.4726 yesterday in New York. The euro rose for a second day before reports today that economists said may show industrial production in France and Italy increased. A dollar rebound damps the appeal of commodities as an alternative investment.
Saudi Arabia will supply full volumes of crude oil under term contracts to refiners in Asia, its largest market, according to a Bloomberg News survey of refinery officials in Japan, South Korea and China.
The kingdom is the biggest producer in the Organization of Petroleum Exporting Countries, a group that pumps 40 percent of the world’s oil. OPEC’s compliance to its output targets has slipped as prices climbed. The 11 members with quotas, all except Iraq, produced 26.5 million barrels a day last month, above their target of 24.845 million barrels a day.
Brent crude oil for January settlement on the London-based ICE Futures Europe exchange was at $73.08 a barrel, up 69 cents, at 11:36 a.m. London time. Yesterday, the contract fell 3.7 percent to $72.39 a barrel, the lowest settlement since Oct. 12.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
