BLBG: Crude Oil Gains for Second Day on Speculation Demand Will Rise
By Gavin Evans and Ann Koh
March 8 (Bloomberg) -- Crude oil rose for a second day on speculation improving world demand and OPEC supply restrictions will help slow growth in stockpiles.
A report tomorrow in the U.S., the world’s largest oil consumer, will probably show consumer confidence is at its highest in a month, according to a Bloomberg News survey. Japan, Asia’s second-largest oil importer, posted a current-account surplus in January as exports climbed for a second month. Kuwait, the fourth-largest Organization of Petroleum Exporting Countries producer, will maintain oil export limits through June, the Kuwait Times reported on March 6.
“Macro-economic sentiment seems to be fairly positive,” said Toby Hassall, research analyst with CWA Global Markets Pty in Sydney. “That’s helping to nudge oil up but the actual physical supply and demand data is still soft.”
Crude oil for April delivery rose as much as 91 cents, or 1.1 percent, to $82.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $82.26 a barrel at 4:04 p.m. in Singapore.
The contract increased 1.6 percent to $81.50 on March 5, the highest closing price since Jan. 11, after a report showed U.S. employment declined less than forecast in February. It gained 2.3 percent last week as global equity markets rallied and U.S. refining climbed to a five-month high.
Gains in the equity markets are supporting prices, Hassall said. The extent of oil’s rally after last week’s U.S. inventory report was surprising given that crude stockpiles are still rising and gasoline stocks remain high, he said.
‘Soft’ U.S. Demand
“Fundamentally, oil demand is soft in the U.S.,” he said. “We’re seeing that across a lot of the advanced economies. They are in the early stages of their recoveries.”
U.S. crude inventories climbed 4.03 million barrels to 341.6 million in the week ended Feb. 26, the highest level since August and 5.7 percent above the five-year average for the period, the Energy Department said on March 3. Gasoline supplies are just short of the 23-month high reached mid-February. Refinery utilization rates were at 81.87 percent in the week ended Feb. 26, the highest in five months.
“That’s the strange thing. There’s plenty of supply capacity on the petroleum side, as far as refinery capacity,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “Things are starting to ramp up with the expectation of demand increases, is the best way to put it.”
China Loans
China plans to nullify all guarantees local governments have provided for financing vehicles as concerns about credit risks on such debt increases, Yan Qingmin, head of the banking regulator’s Shanghai branch, said in an interview.
The Ministry of Finance will also ban all future guarantees by local governments and legislatures in rules that may be issued as early as this month, Yan said March 5.
The Shanghai Composite Index added 16.7, or 0.6 percent, to 3,047.73 at 2:53 p.m. local time.
“I’m in the camp where them slowing things down is actually bullish, because it creates more sustainable growth,” said Nunan.
China’s banks doled out a combined 9.59 trillion yuan ($1.4 trillion) in new loans last year, helping the government engineer a turnaround in the world’s third-largest economy. The credit binge sparked concern about bad loans and asset bubbles.
Hedge-fund managers and other large speculators increased their bets on oil prices rising for a third week, the U.S. Commodity Futures Trading Commission said March 5.
Speculative Bets
Speculative net-long positions, the difference between orders to buy and sell the commodity, rose 7.1 percent to 91,417 contracts in the week ended March 2, the commission said.
OPEC nations pump about 40 percent of the world’s oil. Ministers will meet on March 17 in Vienna to decide whether to adjust production quotas for the first time since they agreed to a record cut in output in December 2008 as fuel demand tumbled during the worst global recession since World War II.
“They would be pretty pleased with oil at this level at this stage of the economic recovery,” CWA’s Hassall said.
Brent crude for April delivery was rose as much as 89 cents, or 1.1 percent, to $80.78 a barrel on the London-based ICE Futures Europe exchange. It was at $80.64 at 4:05 p.m. in Singapore. The contract gained $1.35, or 1.7 percent, to $79.89 a barrel on March 5, the highest level since Jan. 11.
To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Gavin Evans at gavinevans@bloomberg.net
