|August 28, 2009|
Oil Trades Above $72 as Economic Recovery Optimism Spurs Buying
|(Bloomberg) -- Crude oil traded above $72 a barrel in New York on optimism that fuel demand will increase as the global economy pulls out of a recession. |
Oil pared this week's decline as Asian equities climbed, reinforcing expectations of an economic recovery. The U.S. economy contracted at a less-than-expected 1 percent in the second quarter, the government said yesterday. U.S. crude oil stockpiles last week were "above average" for this time of the year, the Energy Department said Aug. 26.
"Right now there is a positive correlation between stocks and oil because people are looking at the same bullish data," said Clarence Chu, a trader at options dealers Hudson Capital Energy in Singapore. "If people think the economy is doing well they buy stocks and they buy crude. Still, this doesn't change the fact that the fundamental picture is pretty weak."
Crude oil for October delivery was at $72.84 a barrel, up 35 cents, on the New York Mercantile Exchange at 3 p.m. Singapore time. It earlier climbed as much as 0.7 percent to $73.03 a barrel. Yesterday, the contract rose $1.06, or 1.5 percent, to settle at $72.49. Futures are poised to fall 1.8 percent this week.
U.S. gross domestic product shrank at a 1 percent annual rate from April to June, less than the 1.5 percent decline projected by economists in a Bloomberg News survey, a Commerce Department report showed yesterday in Washington. Corporate earnings rose by the most in four years, the department said.
The total number of people collecting unemployment insurance in the U.S. fell to the lowest level since April, adding to signs that the economy is pulling out of the recession.
"This is bullish news but it's more of a support," said Hudson Capital's Chu. "The numbers are getting better and by the end of the year we should start recovering."
U.S. crude inventories rose 128,000 barrels last week to 343.8 million, the Energy Department said yesterday. Supplies were forecast to drop by 1.15 million barrels, according to the median of 14 analysts in a Bloomberg News survey.
U.S. total daily fuel use averaged 19.2 million barrels in the past four weeks, down 0.9 percent from a year earlier, the Energy Department said.
Crude oil reached a 10-month intraday high of $75 a barrel on Aug. 25 and has fallen 3.3 percent since then.
"The market found very good resistance at $75 and it will be very difficult to get past that level at the moment," said Ken Hasegawa, a commodity derivatives sales manager at Newedge brokerage in Tokyo. "There are a lot inventories at the moment that no one can use. There is still a lot of oversupply."
Brent crude for October settlement was at $72.70 a barrel, up 19 cents, on the London ICE Futures Europe Exchange at 3 p.m. Singapore time. The contract rose 86 cents, or 1.2 percent, to $72.51 a barrel yesterday.
OPEC will reduce shipments by 0.6 percent in the month to Sept. 12, according to consultant Oil Movements, as the group prepares to discuss the impact of record production cuts announced last year.
The Organization of Petroleum Exporting Countries will export 22.53 million barrels a day by sea in the four-week period, down from an average of 22.67 million barrels a day in the month to Aug. 15, Oil Movements said in a report e-mailed yesterday.
OPEC members, due to meet on Sept. 9, have implemented about 72 percent of 4.2 million barrels a day in supply cuts agreed on last year, according to Bloomberg data.
Crude oil futures may fall next week on speculation that demand will be slow to rebound and the dollar will strengthen, a survey of analysts showed.
Twenty-three of 39 analysts surveyed by Bloomberg News, or 59 percent, said futures will decline through Sept. 4. Six respondents, or 15 percent, forecast that the market will rise, and 10 said prices will be little changed. Last week, 55 percent of analysts said oil would drop.
To contact the reporter on this story: Christian Schmollinger in Singapore at email@example.com.
By Christian Schmollinger