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Oil at near highest level in four months on outlook

SINGAPORE - Oil traded near the highest level in four months in New York after posting the longest run of weekly gains since April 2009, lifted by speculation that a global economic recovery will boost fuel demand.

West Texas Intermediate crude was little changed after climbing for a seventh week. Chinese industrial companies’ profits rose for a fourth month in December, the National Bureau of Statistics in Beijing said on Sunday. US government reports on Monday may show durable goods orders and pending homes sales rose last month, according to Bloomberg News surveys. The oil market is ‘well supplied,’ Khalid Al Falih, Saudi Arabian Oil Co’s chief executive officer, said on January 26 in Davos, Switzerland.

“Prices have been moving upwards from continued better economic data from the world’s two largest consumers, US and China,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “Continued improved data is required to sustain these higher levels as there remains enough uncertainty within the eurozone for prices to fall.”

Crude for March delivery was at $95.90 a barrel, up two cents, in electronic trading on the New York Mercantile Exchange at 10:07am London time. The volume of all futures traded was 38 per cent below the 100-day average. WTI rose 0.3 per cent to $95.88 last week and closed at $96.24 on January 22, the highest since September 17.

Brent for March settlement dropped 19 cents at $113.09 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 16 per cent below the 100-day average. The European benchmark contract was at a premium of $17.19 to WTI. The gap was $17.40 on January 25.

Durable goods orders in the US, the world’s biggest oil consumer, probably advanced two per cent in December from the prior month after climbing 0.8 per cent in November, according to the median estimate in a Bloomberg survey. Pending home sales probably gained 0.1 per cent, a separate survey shows.

Net income by industrial companies in China, the second- largest oil user, increased 17.3 per cent from a year earlier to 895 billion yuan ($144 billion), according to the statistics bureau. The nation’s economic growth will accelerate to 8.4 per cent this year, the Chinese Academy of Sciences forecast on January 26 in its annual outlook. Gross domestic product increased 7.8 per cent last year, the least since 1999, government data show. — Bloomberg

“Things are looking up” for the global economy, Saudi Aramco’s Al Falih said in an interview at the World Economic Forum. “We have bottomed out, and we are coming out of the economic doldrums that we have suffered from since 2007.” Saudi Arabia is the largest crude producer in the Organization of Petroleum Exporting Countries, which supplies about 40 per cent of the world’s oil.

WTI will trade from $95 to $97 a barrel this week and Brent from $112 to $114 a barrel, according to Hansen.

Hedge funds boosted bullish bets on US crude for a sixth consecutive week as futures advanced. Money managers increased net-long positions, or wagers that crude will rise, by 15 per cent in the week ended on January 22, according to the Commodity Futures Trading Commission’s January 25 Commitments of Traders report. It was the longest run of gains in records dating back to June 2006.

The average price for retail regular gasoline in the US rose 1.96 cents a gallon in the past two weeks to $3.3443 a gallon, according to Lundberg Survey. The survey covers the period ended on January 25 and is based on information obtained from about 2,500 stations by the Camarillo, California-based company. The average price is down 5.01 cents from a year earlier.

“We can be a little bit optimistic on the economic recovery, and of course on China and the US,” said Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo who says WTI may climb as high as $100 a barrel this week, while Brent will trade from $112 to $118. “The oil market is trending to the upside.”

Oil may rise this week as the US Federal Reserve continues an asset-buying program to boost the economy and reduce the jobless rate, according to Hasegawa. The Federal Open Market Committee will announce its latest policy statement after its January 30 meeting.

Unemployment was probably unchanged at 7.8 per cent in January, according to the median forecast in a Bloomberg survey of economists before Labour Department figures on February 1. Fed Chairman Ben S. Bernanke said on January 14 that the rate “is not an acceptable situation.”

“If the results of the FOMC and employment data are better than expected, then WTI might try to touch $100 a barrel,” Hasegawa said.