Crude Oil Rises as Leading Indicators Index Gains by Most in Eight Months
Crude oil rose as the index of U.S. leading economic indicators increased in November by the most in eight months, a signal that the recovery will strengthen next year and boost fuel demand.
Oil gained 0.4 percent on the U.S. report and one that showed German business confidence unexpectedly climbed to a record in December. U.S. fuel consumption jumped 6.5 percent in November from a year earlier, according to a report today from the American Petroleum Institute.
“Right now, the crude market is taking its cues from global and domestic economic growth expectations,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas- based energy consultant. “Such a strong leading economic indicators number provides further support for a bullish growth outlook.”
Crude for January delivery climbed 32 cents to settle at $88.02 a barrel on the New York Mercantile Exchange. Futures increased 0.3 percent this week and 11 percent this year.
The index of U.S. leading economic indicators, the New York-based Conference Board’s gauge of the outlook for the next three to six months, advanced 1.1 percent to the highest level since March. The reading matched the median forecast of economists surveyed by Bloomberg News. The U.S. is the world’s largest oil-consuming country.
In other signs of growth, the Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, rose to 109.9 from 109.3 in November. That’s the highest level since records for a reunified Germany began in 1991. Economists predicted a drop to 109, the median of 36 forecasts in a Bloomberg News survey.
U.S. Fuel Demand
Total deliveries of petroleum products, a measure of demand, climbed to 20 million barrels a day last month from 18.8 million in November 2009, according to the API. Consumption during the first 11 months of 2010 rose 2.4 percent to 19.2 million barrels a day.
“The uptick in demand is a real good sign about the economic rebound,” said John Felmy, chief economist with the Washington-based API, in a telephone interview. “There’s been a consistent uptick in demand for industrial fuels this year.”
Total products supplied, a measure of U.S. fuel demand, climbed 1 percent to 20.2 million barrels a day last week, the highest level since January 2009, according to an Energy Department report Dec. 15.
Brent crude for February settlement gained 7 cents to $91.67 a barrel on the ICE Futures Europe exchange in London.
Dollar Strengthens
“People are saying the economy is picking up, and if that is the point, it should lead to either higher demand for crude, or the U.S. dollar trading higher as people get more confident,” said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
The dollar gained 0.5 percent to $1.3173 per euro at 3:05 p.m. in New York from $1.3244 yesterday after Ireland’s credit rating was cut five levels today by Moody’s Investors Service. The currency has advanced 3.7 percent in the past four weeks.
Moody’s cut Ireland’s rating to Baa1 from Aa2, three levels above non-investment grade, and said further downgrades are possible.
The Thomson Reuters/Jefferies CRB Index of 19 commodities advanced to a 26-month high today, led by sugar and coffee. It gained as much as 1.2 percent to 321.04, the highest intraday level since Oct. 6, 2008. It was up 1 percent at 320.62 at 3:05 p.m. in New York. All the commodities in the index increased.
Trading Range
Oil futures have traded in a range of less than $3 a barrel in December and have changed direction every day since Dec. 9.
“It’s all about the money flow, and we’ll be following the dollar and equities,” said Kyle Cooper, director of research at IAF Advisors in Houston. “It just looks like the market’s kind of going sideways. It doesn’t want to go above $90 or below $85.”
Oil may decline next week on speculation the U.S. Energy Department will report an increase in supplies after the biggest drawdown in more than eight years in this week’s data.
Eighteen of 34 analysts and traders, or 53 percent, forecast crude will fall through Dec. 23. Nine respondents, or 26 percent, predicted prices will climb and seven estimated there will be little change.
U.S. crude stockpiles dropped 9.85 million barrels in the week ended Dec. 10 to 346 million, according to the Energy Department. Supplies are 7.2 percent above the five-year average, according to the government report on Dec. 15.
“The physical market is tightening a little bit with the colder temperatures,” said Tobias Merath, head of commodities at Credit Suisse Group in Zurich. “But looking further into the future, inventories are still high, so I don’t know much further upside there is. Prices will remain around $90.”
Oil volume in electronic trading on the Nymex was 540,208 contracts as of 3:05 p.m. in New York. Volume totaled 657,203 contracts yesterday, 3.5 percent below the average of the past three months. Open interest was 1.37 million contracts.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
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