Crude Oil Heads for Biggest Weekly Gain in a Month on U.S. Economy Outlook

Oil headed for its biggest weekly gain in a month on speculation that U.S. fuel demand will increase as the economic recovery gathers pace in the world’s biggest oil consumer.

Futures have climbed 5.3 percent this week, the most since the period ending Nov. 5, as data showed U.S. home sales rose and manufacturing expanded. A Labor Department report today may indicate that hiring in the U.S. increased for a second month. Oil reached a three-week high after the Bundesbank raised its forecast for German economic growth next year.

“Macroeconomic sentiment has improved with stronger data from the U.S. and China,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “However, this optimism has little to do with fundamentals. A sustained rally is unlikely here.”

Oil for January delivery on the New York Mercantile Exchange rose as much as 33 cents to $88.33, the highest price since Nov. 11. The contract was at $88.17 a barrel at 12:06 p.m. London time. It rose 1.4 percent yesterday to $88 a barrel, the highest settlement since October 2008. Brent crude for January on the ICE Futures Europe exchange in London advanced as much as 44 cents to $91.13 a barrel, the most since Oct. 3, 2008.

Crude will rise to $120 a barrel in 2012 as consumption in emerging economies increases, analysts at JPMorgan Chase & Co. said in a report today.

“Strong emerging oil demand growth over the next 24 months is very likely to lift the call on OPEC production to levels last seen at the peak of the oil price spike in 2008,” JPMorgan analysts led by Lawrence Eagles in New York said. “We expect oil inventories to continue their drawing trend over the first quarter.”

U.S. Jobs Report

U.S. employers added 150,000 workers last month, a Bloomberg survey showed before the Labor Department report today. Data yesterday showed pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October, while claims for jobless benefits over the past month on average dropped to a two-year low.

“The market is going to be focused on what happens tonight with the unemployment number,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Oil is coming back a little bit because of profit-taking.”

Brent crude for next month is trading at a 3-cent premium to the February future, a market situation known as backwardation that suggests immediate supplies are more in demand than later deliveries.

Cold Weather

Demand for European crude has increased as declining temperatures in the region boost heating oil consumption. The premium of gasoil, another term for the fuel, climbed to $11.82 above Brent crude, from $10.81 yesterday, according to ICE data.

Oil analysts surveyed by Bloomberg News were split over the direction of crude oil prices next week. Ten of 28 analysts, or 36 percent, forecast crude will advance through Dec. 10. Ten more respondents predicted that futures will be steady. Eight said there will be a decline.

Oil also rose this week as gasoline prices in New York surged amid declining stockpiles in the U.S. Northeast. Inventories along the East Coast fell 1.8 percent last week, an Energy Department report showed yesterday. Irving Oil Corp. said it shut a unit at its Saint John refinery in New Brunswick that supplies New York, the delivery point for the Nymex contract.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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