BLBG: Oil Set for Biggest Weekly Gain Since October on Demand Outlook
By Nidaa Bakhsh and Yee Kai Pin
Dec. 18 (Bloomberg) -- Crude oil rose in New York, poised for its biggest weekly gain since October on optimism fuel demand will increase amid improved prospects for a global economic recovery.
Oil has gained 4.8 percent this week, the most since the week ended Oct. 16, after the Federal Reserve said factories produced more goods in November than anticipated, signaling fuel demand may rise. Below-normal temperatures, which boosted heating demand last week, are forecast from Chicago to New York in the next two weeks, while snow fell in London.
“Colder temperatures are improving sentiment on demand,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. A weaker dollar is also helping boost the appeal of oil as a hedge, he said.
Crude oil for January delivery rose as much as 81 cents, or 1.1 percent, to $73.46 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $73.22 a barrel at 10 a.m. London time. Futures, which lost 54 percent in 2008, have gained 64 percent this year.
European stocks advanced, extending the second weekly gain this month, after a report showed German business confidence increased. The Dow Jones Stoxx 600 Index rallied 0.5 percent to 248.43 at 9:58 a.m. in London, set for a 1.3 percent gain this week.
German Confidence
German business confidence in December increased to the highest since July 2008, a sign the economic recovery is on track. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, rose to 94.7 from 93.9 in November, higher than the 94.5 median estimate of 33 economists in a Bloomberg News survey.
The Energy Department said Dec. 16 that U.S. crude oil inventories declined to the lowest since Jan. 9. Distillate fuel stockpiles, which include heating oil and diesel, fell 2.95 million barrels to 164.4 million.
“The demand outlook is brightening,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “We had a very supportive set of numbers from the Department of Energy.”
Oil slipped yesterday as the dollar strengthened against the euro, damping the appeal of commodities as an alternative investment. The U.S. currency was at $1.4382 per euro at 9:25 a.m. in London, from $1.4338 in New York yesterday.
Jobless Claims
U.S. jobless claims unexpectedly rose last week, a reminder the labor market may take time to recover. Initial jobless claims increased 7,000 to 480,000 in the week to Dec. 12, from a revised 473,000 the previous week, Labor Department data showed yesterday.
“I don’t see the oil market as being especially tight but I think anticipation of an international economic recovery is a key factor still supporting it,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “What we’re seeing is some buying partly reflecting the earlier dip in the oil price.”
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, will meet next week in Luanda, Angola. The 12-member group announced 4.2 million barrels a day of production cuts in 2008.
OPEC is aiming for an oil price above $70 a barrel, Venezuela’s Finance Minister Ali Rodriguez, a former group president, said yesterday in Caracas. OPEC President Jose Maria Botelho de Vasconcelos said members will keep output quotas unchanged, Radio Ecclesia reported.
OPEC will probably maintain its output quotas at next week’s meeting as prices trade close to members’ $75-a-barrel target, a Bloomberg News survey showed.
OPEC Survey
All 36 analysts surveyed said the group will decide for a fourth time this year to maintain its formal limit of 24.845 million barrels a day.
Oil prices may increase next week on speculation rising U.S. fuel demand will reduce inventories, according to a separate Bloomberg News survey. Twenty-two of 48 analysts and traders, or 46 percent, said futures will increase through Dec. 24, the most bullish response since July.
Brent crude oil for February settlement rose as much as 70 cents, or 1 percent, to $74.07 a barrel on London’s ICE Futures Europe exchange and traded at $73.74 at 9:59 a.m. local time.
To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.netYee Kai Pin in Singapore at kyee13@bloomberg.net
