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 trimmed yesterday’s 1.4 percent rally as traders sought to profit after the highest close in two years. Crude has climbed 4.7 percent this week, the most since the period ending Nov. 5, as data showed U.S. home sales increased and manufacturing expanded. A Labor Department report today may indicate the U.S. hired more workers for a second month.

“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.”

The January contract was at $87.94 a barrel, down 6 cents, or 0.1 percent, in electronic trading on the New York Mercantile Exchange at 3:22 p.m. Singapore time. It closed yesterday at $88 a barrel, the highest since October 2008.

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.

Brent crude for January settlement was at $90.81 a barrel, up 11 cents, on the London-based ICE Futures Europe exchange. The contract increased $1.82, or 2 percent, to end the session yesterday at $90.69, the highest close since Oct. 1, 2008.

Brent Backwardation

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

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 $11.61 above Brent crude, from $10.81 yesterday, according to ICE data.

“The falling temperatures and the snowing in Europe is a factor in creating stronger crack spreads,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo. “That’s creating local demand for crude.”

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.

Gasoline Surge

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.

Gasoline for January delivery was at $2.3479 a gallon, down .74 cents. The contract yesterday gained 2.4 percent to the highest settlement since May 3. It has risen 6.1 percent this week.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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

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