Oil traded close to a two-year high as cold weather boosts demand for heating fuels in Europe and North America and amid speculation the U.S. economic recovery will accelerate next year, increasing oil consumption.
Temperatures in Europe and parts of the U.S. are colder than usual, boosting same-day U.K. natural gas prices by as much as 14 percent today. Crude futures gained as much as 0.8 percent as European equities advanced to the highest level since September 2008.
“Renewed cold weather forecasts for Europe as well as colder than normal forecasts for the U.S. east coast is supportive for the oil market,” said Bjarne Schieldrop, chief commodities analyst at SEB AB, the Stockholm-based lender.
Crude for January delivery gained 63 cents to $88.65 a barrel in electronic trading on the New York Mercantile Exchange at 1 p.m. London time. The contract expires today. The more actively traded February contract advanced 51 cents to $89.11 a barrel. Brent crude for February was at $92.07 a barrel, up 40 cents, on the London-based ICE Futures Europe exchange.
The Stoxx Europe 600 Index climbed 1 percent, while futures on the Standard & Poor’s 500 Index were up 0.1 percent.
“Everyone is expecting a move up in the oil market,” Roland Stenzel, a crude-oil trader at E&T Energie Handelsgesellschaft mbH, said from Vienna. “Technically it’s looking strong, fundamentally it’s looking strong.”
Oil, which surged 78 percent in New York in 2009, is up 11 percent this year amid speculation the global economic recovery will boost consumption. Prices rallied to $90.76 a barrel on Dec. 7, the highest since October 2008.
Crude is likely to “break out” toward $94 a barrel if prices hold above the $87 support level, according to Chart Partners Group Ltd., a Bangkok-based technical research company.
Commodities including oil, gold and copper are showing bullish short-term trends going into January, even as they “flirt” with an “opposing, corrective cycle” in the longer term, said Thomas Schroeder, managing director at Chart Partners. The $87-a-barrel level is a pivot point and was the high for the year a few months ago, Schroeder said. Crude futures settled above $87 a barrel three times in November before rallying above $88 a barrel in December.
“It’s popped above $87, it came back down and had a hard fall, went back above $87,” said Schroeder. “As long as the $87 support holds, I think we’ll have some more significant highs in January to deal with.”
U.S. crude stockpiles dropped the most since 2002 in the week to Dec. 10, the U.S. Energy Department said last week. The inventory fell 9.85 million barrels to 346 million.
“Consumer demand becomes increasingly hard to measure through the holiday season and end-of-year tax considerations create noise in the DOE inventory reports,” Stephen Schork, president of The Schork Group Inc., a consultant in Villanova, Pennsylvania, said in a report. “We expect low volume and high volatility due to the holidays.”
Hedge-fund managers and other large speculators reduced net-long positions in New York crude futures and options for the first time in three weeks, according to the Commodity Futures Trading Commission. Bets that prices will rise outnumbered short positions by 205,890 contracts in the week to Dec. 14, the Washington-based regulator said Dec. 17.
U.K. natural gas rose as much as 14 percent to 73.5 pence a therm after National Grid Plc forecast record demand today. Gas for same-day delivery was at 68 pence as of 12:33 a.m. in London, according to broker data compiled by Bloomberg.
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