Oil Rises to Highest in Four Days as Equity Gains Boost Outlook for Demand

Crude oil climbed to the highest in four days as increased profit forecasts drove Asian equities higher and investors grew more optimistic that China’s growth will bolster fuel demand.

Oil traded above $79 a barrel in New York after Asian stocks rose for the sixth time in seven days. China’s full-year economic growth may be as much as 9.5 percent compared with 9.1 percent in 2009, State Council researcher Zhang Liqun said yesterday. About 42 percent of the MSCI Asia Pacific Index’s companies that posted profit since July 12 have beaten analyst estimates, data compiled by Bloomberg show.

“The China market should be quite steady,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo. “Equity markets should be the main driver for the crude oil market.”

Crude for September delivery gained as much as 40 cents, or 0.5 percent, to $79.35 a barrel on the New York Mercantile Exchange, the highest intraday price since July 27. It was at $79.21 at 3:14 p.m. Singapore time. The contract rose 59 cents, or 0.8 percent, to $78.95 on July 30. Futures climbed 4.4 percent in July, the biggest monthly gain since March.

Oil also advanced because of a weaker dollar. The U.S. currency fell to $1.3069 per euro at 3:04 p.m. Singapore time, from $1.3052 in New York on July 30.

“As long as the U.S. dollar is weaker, the U.S. interest rate is lower, people may take the risk of investing money in commodities,” said Astmax’s Emori. “I’m quite positive on the market.”

China Manufacturing

Brent crude for September settlement gained as much as 42 cents, or 0.5 percent, to $78.60 a barrel on the London-based ICE Futures Europe exchange and was at $78.45 a barrel at 3:04 p.m. Singapore time. The contract rose 59 cents, or 0.8 percent, to $78.18 a barrel on July 30.

Oil rose even as manufacturing in China contracted for the first time in 16 months in July, according to a survey by HSBC Holdings Plc. A purchasing managers’ index released today by HSBC and Markit Economics fell to 49.4 from 50.4 in June.

The Purchasing Managers’ Index was at 51.2 in July, the Federation of Logistics and Purchasing said yesterday. A reading above 50 shows an expansion.

The fastest-growing major economy is cooling as the government clamps down on property speculation, trims credit growth and shutters energy-intensive and polluting factories.

U.S. Growth

Oil tumbled as much as 2 percent on July 30 after the Commerce Department reported gross domestic product slowed to a 2.4 percent annual rate in the three months to June as consumer spending growth slumped. The figure was less than the 2.6 percent median forecast by economists surveyed by Bloomberg News.

“Oil prices have swung back to the top of the $75-to-$80 range despite slowing economic growth headlines from China and the U.S., thanks to anticipation that more stimulus measures will materialize,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong.

Hedge-fund managers and other large speculators increased their net-long positions, or bets that prices will rise in the week ended July 27, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions outnumbered short positions by 44,313 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 8,168 contracts, or 23 percent, from a week earlier.

To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net

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