Oil Heads For Highest Annual Close Since 2007

Oil, little changed in New York, headed for a second yearly advance and its highest year-end close since 2007, as evidence the global economic recovery is gaining momentum stokes demand for raw materials.

Crude has risen 13 percent this year, extending last year’s 78 percent rally. Commodity prices have beaten gains in stocks, bonds and the dollar this year as China led a recovery from the first global recession since World War II.

“The market is still proving very resilient and appears to be stronger than the equity rally supporting it,” said Alexander Ridgers, head of commodities at London-based CMC Markets, which handles more than $150 million a day in U.S. crude contracts.

Oil for February delivery was at $89.65 a barrel, down 19 cents, on the New York Mercantile Exchange at 12:50 p.m. London time. Brent crude for February settlement was down 32 cents at $92.77 a barrel on the ICE Futures Europe exchange in London.

Futures had their biggest decline in a month yesterday, settling below $90 for the first time since Dec. 21, after a U.S. government report showed a smaller-than-forecast drop in crude inventories in the world’s biggest oil-consuming nation.

U.S. crude supplies decreased 1.26 million barrels to 339.4 million in the seven days ended Dec. 24, the Department of Energy said. That’s less than the median forecast for a 2.85 million-barrel drop in a Bloomberg survey of 14 analysts.

Third-Worst Performer

“The oil demand picture has not changed dramatically,” said Angelos Damaskos, who manages the Junior Oils Trust in London, a fund that invests in exploration companies. “The developed economies are still not growing very fast yet. Industrializing countries are driving demand.”

Oil, which rallied 78 percent in 2009, is the third-worst performer this year among 22 commodities tracked by Bloomberg, as rising supplies countered optimism fuel consumption is recovering. Natural gas and cocoa are the worst performers.

Futures touched $91.88 a barrel on Dec. 27, the highest since October 2008, amid signs the U.S. economy is rebounding. Oil has risen in eight of the past nine years and fell 54 percent in 2008, the most in at least a quarter of a century.

Oil closed at $79.36 a barrel last year and $44.60 in 2008. It ended 2007 at $95.98 a barrel, a record annual closing price. New York-traded oil may decline next week, a Bloomberg survey of traders and analysts shows. Eighteen respondents, or 58 percent, forecast crude futures will fall through Jan. 7.

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

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