Oil Rises From Two-Week Low as U.S. Economic Data Improves Demand Outlook
Oil rose from the lowest in two weeks after an unexpected decline in U.S. claims for jobless benefits and gains in housing starts bolstered the economic outlook for the world’s largest crude user.
Oil climbed as much as 0.8 percent after the Labor Department said unemployment-insurance applications dropped to the lowest in three weeks. The dollar extended losses against the euro as investors grew more confident that the sovereign- debt crisis in Europe will be contained. A weaker U.S. currency enhances the investment appeal of commodities.
“Good economic indicators, or some short covering before the weekend, may cause crude to go up to $89,” said Ken Hasegawa, a Tokyo-based commodity derivative sales manager at Newedge, a brokerage. “A rebound is possible if crude falls to $87 a barrel.”
Crude for January delivery increased as much as 67 cents to $88.37 a barrel in electronic trading on the New York Mercantile Exchange. The contract, which expires Dec. 20, was at $88.15 at 4:02 p.m. Singapore time. Yesterday, it fell 1 percent to $87.70, the lowest settlement since Dec. 1. Futures have gained 0.5 percent this week after losing 1.6 percent last week.
U.S. applications for jobless-insurance payments fell to 420,000, the Labor Department said. Economists had projected a median increase in claims to 425,000, based on a Bloomberg News survey.
Builders in November began work on more homes for the first time in three months. Housing starts rose to a 555,000 annual rate last month, up 3.9 percent from October, Commerce Department data showed yesterday.
The euro advanced against the greenback for a second day as European Union leaders agreed to create a mechanism to contain future debt shocks and the European Central Bank armed itself with more capital. The 16-nation currency rose as much as 0.6 percent to $1.33927 from $1.3244 in New York yesterday.
“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.
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. Last week, 46 percent of survey respondents forecast the market would drop.
U.S. crude stockpiles fell 9.85 million barrels in the week ended Dec. 10 to 346 million, according to the Energy Department. That’s the biggest decrease since May 2008.
Brent crude for February settlement rose as much as 0.6 percent to $92.15 a barrel on the London-based ICE Futures Europe exchange. Yesterday, the January contract expired at $91.71, down 0.5 percent.
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