Crude Rises as China Imports More Oil, Increases Refining Rates to Record

Crude advanced after a government report showed Chinese refineries ran at record rates last month, signaling oil demand will continue to increase in the world’s largest energy user.

Futures gained as much as 1.5 percent, rising with global equity markets. China’s refiners increased crude processing to a record in November, according to the China Mainland Marketing Research Co., which compiles data for the National Bureau of Statistics. The Organization of Petroleum Exporting Countries maintained production quotas at a Dec. 11 meeting.

“We could be heading for a year-end rally, as the general outlook is good,” said Roland Stenzel, a crude-oil trader at E&T Energie Handelsgesellschaft mbH in Vienna. “Fundamentals from Asia are much better than the U.S.”

The January contract rose as much as $1.35, or 1.5 percent, to $89.14 a barrel on the New York Mercantile Exchange and traded at $89.09 at 1 p.m. London time. The contract fell 1.6 percent last week and has risen 12 percent this year. Brent crude for January settlement climbed as much as $1.61, or 1.8 percent, to $92.09 a barrel on the ICE Futures Europe exchange in London. Brent has gained 18 percent this year.

China, which last year overtook the U.S. as the world’s biggest energy user, boosted net imports of crude by 26 percent in November from a month earlier as refineries ramped up processing rates to ease a diesel shortage. Net purchases were 20.3 million metric tons, or 5 million barrels a day, the highest since September’s record 22.9 million tons, data from the Beijing-based General Administration of Customs showed.

Refining Rates

Refineries processed 36.65 million metric tons in November, or 8.96 million barrels a day. That exceeded the record of 8.76 million barrels a day in October.

Crude also gained as China held off raising interest rates, opting to increase reserve requirements for the country’s banks for the third time in five weeks. Chinese inflation accelerated to 5.1 percent in November, the fastest pace in 28 months.

China’s decision to maintain rates “is likely to continue to support the crude oil market,” Filip Petersson, a Stockholm- based commodities strategist at SEB AB, wrote in a note today. “Confidence is growing that the Chinese economy is healthy and that authorities will be able to control it using other measures than interest rate hikes and thus avoid a hard landing.”

Global oil demand has exceeded supply by more than 900,000 barrels a day on a seasonally adjusted basis since May, Goldman Sachs Group Inc. said in an e-mailed report today. Goldman expects the world oil market to remain in deficit in the first half of next year, it said.

Structural Bull Market

“As OPEC spare capacity is drawn down through the second half of 2011, we expect the market to begin to transition back to a structural bull market, with WTI crude oil prices rising back above $100 a barrel,” Jeffrey Currie, London-based head of commodities research, wrote.

Crude will average $100 a barrel in 2011 and $110 a barrel in 2012, according to Goldman estimates.

Hedge-fund managers and other large speculators increased their net-long position in crude-oil futures and options in the week ended Dec. 7, according to Commodity Futures Trading Commission data. Managed-money bets that prices will rise outnumbered short positions by 206,807 futures, the Washington- based regulator said in its weekly Commitments of Traders report. Net long positions rose by 42,603 contracts, or 25.95 percent, from a week earlier.

Producers and merchants increased net-short positions by 13 percent in the week ended Dec. 7, according to the CFTC report. Sales increased for the first time in four weeks as producers secured profits near $90 a barrel, reversing a two-year contango and raising speculation that stockpiles will decline.

OPEC maintained its output quotas, forecasting demand growth will slow as the global economy struggles to recover amid ample supplies.

Oil supply and demand are “in balance,” and $70 to $80 is “a good price” for oil, Saudi Arabian Oil Minister Ali al- Naimi said at the group’s meeting in Quito, Ecuador, on Dec. 11.

To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net

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

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