Oil Trims Losses to Trade Near Two-Year High on Economic Recovery Optimism
Oil traded near the highest in three weeks after greater-than-forecast growth in U.S. private employment bolstered optimism fuel demand will increase in the world’s biggest crude consumer.
Prices erased losses earlier today as cold weather boosted heating demand and disrupted transport in Europe. A government report tomorrow is expected to show the U.S. added 145,000 new jobs, according to a Bloomberg News survey of economists. Reports showed U.S. payrolls rose in November while the country’s manufacturing expanded for a 16th straight month.
“The U.S. data was very supportive for prices,” said Serene Lim, a commodity analyst at Australia & New Zealand Banking Group Ltd. in Singapore. “People are expecting that the payroll report to be quite positive so that should boost oil prices also.”
The January contract was at $86.73 a barrel, down 2 cents in electronic trading on the New York Mercantile Exchange at 2:36 p.m. Singapore time. Yesterday, it rose $2.64 to close at $86.75, the highest settlement since Nov. 11.
Crude trimmed yesterday’s 3.1 percent gain earlier today after Energy Department data showed U.S. fuel consumption declined for a third week and oil supplies unexpectedly rose a second week.
U.S. fuel demand, in terms of products supplied to refiners, dropped 1.8 percent to 18.5 million barrels a day in the week ended Nov. 26, the lowest in six weeks, the Energy Department said. Crude stockpiles increased by 1.07 million barrels. They were forecast to decrease by 1.15 million barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.
Futures also pared some gains as the greenback rallied. The Dollar Index, a measure against six major currencies, rose as much as 0.2 percent today. The dollar was up 0.3 percent against the euro.
Oil gained 3.3 percent last month and is 9.2 percent higher this year. Prices climbed yesterday on signs the global recovery is strengthening, stoking speculation oil demand may rise.
Brent crude for January settlement was at $88.85 a barrel, down 2 cents, on the London-based ICE Futures Europe exchange. The contract rose $2.95, or 3.4 percent, to $88.87 yesterday.
U.S. gasoline inventories climbed last week while distillate fuel supplies, including diesel and heating oil, slipped. Crude stockpiles at Cushing, Oklahoma, the delivery point for New York oil futures, jumped 2.7 percent to 34.5 million barrels.
The Cushing gains have increased the discount between January New York futures and London’s Brent contract to $2.05 a barrel today compared with $1.05 a month ago.
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