Crude Oil Rises as Reports Show Improved Economic, Fuel Outlook

Oil climbed, trimming its second weekly loss, on speculation a recovery in the U.S. economy, the world’s biggest crude consumer, will stoke fuel demand.

Futures retraced some of yesterday’s 2.4 percent decline as Asian equity markets gained and investors bought contracts against a weakening dollar. Jobless claims fell in the U.S., the world’s largest economy, while the New York-based Conference Board’s index of leading economic indicators climbed, matching the forecast of economists surveyed by Bloomberg News.

“For the short term, the positive economic indicators should support the prices,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Fundamentals aren’t what people are looking at for the market, but currencies and financial market conditions.”

The December contract added as much as 81 cents, or 1 percent, to $81.37 a barrel in electronic trading on the New York Mercantile Exchange, and was at $81.34 at 2:14 p.m. Singapore time. Yesterday it declined $1.98 to $80.56. The contract is down 1 percent this week, heading for its second weekly loss.

Labor Department figures yesterday showed U.S. initial jobless claims dropped by 23,000 to 452,000 in the week ended Oct. 15.

‘Positive Fundamentals’

“Fundamental signals were positive, with oil output in China at near record levels, suggesting strong demand for crude,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “Economic data from other key nations were also positive, with U.S. jobless claims declining last week.”

Chinese crude production gained 9 percent in September, the National Bureau of Statistics said yesterday. Oil refining reached 8.5 million barrels a day last month, China Mainland Marketing Research Co. said.

The MSCI Asia Pacific Index climbed 0.5 percent to 130.32 as of 2:14 p.m. in Singapore. Futures on the U.S. Standard & Poor’s index advanced 0.2 percent.

Oil also rose as the dollar fell against the euro, boosting the appeal of commodities as an inflation hedge. The greenback dropped after U.S. Treasury Secretary Timothy F. Geithner said nations should use policy tools including exchange rates to reduce trade imbalances. The dollar declined to $1.3961 per euro as of 2 p.m. in Singapore from $1.3920 in New York yesterday.

“Oil still remains quite volatile, there’s no doubt about it,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Crude is a little bit mixed in terms of its outlook. It’s still within its range of $84 on the topside and $79.50 on the downside.”

European Refiners

European oil refiners are getting the most profit from processing crude in two years as strikes in France curb production and winter heating-fuel demand rises.

The return from converting crude into fuels such as gasoline and diesel was $4.88 a barrel in the first two weeks of October, the highest level since 2008, according to data from BP Plc. That compares with an average of $2.59 in the third quarter of this year.

Nine out of 11 refineries in France have ceased production and two are running at reduced rates amid protests that began at ports on Sept. 27 before escalating over President Nicolas Sarkozy’s planned pension overhaul. Total SA, France’s biggest oil company, has five sites offline, while Petroplus Holdings AG has two that are affected.

Brent crude for December settlement gained as much as 82 cents, or 1 percent, to $82.65 a barrel on the London-based ICE Futures Europe exchange. Yesterday it slipped $1.77, or 2.1 percent, to $81.83.

Oil may decline next week after China’s oil processing grew the least in 18 months as government measures to cool the economy reduced fuel demand, a Bloomberg News survey showed.

Fourteen of 30 analysts, or 47 percent, forecast crude oil will fall through Oct. 29. Eleven respondents, or 37 percent, predicted prices will be little changed and five estimated an increase. Last week analysts were split over whether futures would drop or climb.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Clyde Russell in Singapore at crussell7@bloomberg.net

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