Brent Nears $100 on Cold Snap; WTI Falls After U.S. Jobless Data

Brent crude headed toward $100 a barrel, widening the spread with New York oil futures as crude stockpiles remained above their seasonal average and jobless claims increased in the U.S., the world’s largest consumer.

Brent traded above $98 a barrel for a second day as wintry weather in Europe and the U.S. boosted demand for heating oil. West Texas Intermediate in New York declined after Labor Department figures showed initial jobless claims increased more than economists estimated last week and an Energy Department report yesterday showed increasing inventories of oil products.

“Product prices are at their highest in two years, mainly because of the cold weather, which is making the whole oil market bullish,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “While storage capacity in the U.S. is fully loaded these days, damping demand for WTI, good growth numbers in consuming nations suggest demand will increase, and we could see Brent hitting $100 by mid-next week.”

Brent crude for February settlement rose as much as 54 cents, or 0.6 percent, to $98.66 a barrel and was at $98.19 at 1:44 p.m. on the ICE Futures Europe exchange in London. Yesterday, the contract climbed to $98.85, the highest price since Oct. 1, 2008, when Brent futures last traded above $100.

WTI for February delivery was at $91.52 a barrel in electronic trading on the New York Mercantile Exchange, down 34 cents. Yesterday, oil in New York climbed to $91.86, the highest settlement since Oct. 3, 2008, after Alyeska Pipeline Service Co. said it would close the Trans Alaska Pipeline System to install a bypass and repair a leak.

Brent’s Surge

Brent is poised to surge beyond $100 a barrel as prices break out of their ranges and trade above two moving averages, according to Glen Ward, head of retail derivatives at London Capital Group Holdings Plc.

The price of Brent is above its 9-day, 14-day and 40-day moving averages. The next “significant resistance” is at $105, which is the 61.8 percent Fibonacci retracement from the 2008 price range at $36.20 to $147.50 a barrel, Ward said.

The proximity to $100 may prompt institutional investors and speculators to buy more futures, Commerzbank AG said.

“The closeness to the psychologically important mark of $100 should additionally stir the interest of financial investors,” Eugen Weinberg, a Commerzbank commodities analyst, wrote in a report received by e-mail today. “It is probably therefore only a matter of time before this mark is reached.”

U.S. Jobless Claims

The number of first-time claims for unemployment insurance payments in the U.S. jumped in the first week of 2011 to the highest level since October, the Labor Department said.

Initial jobless claims rose by 35,000 to 445,000, the department reported today. The median estimate in a Bloomberg News survey called for 410,000 filings.

Heating oil futures surged to a 27-month high yesterday on speculation that snowstorms in the U.S. Northeast will increase demand for heating fuel. Heating oil gained a third day, settling at $2.6186 a gallon in New York, as a storm dropped more than 9 inches of new snow on New York City and pounded Boston with blizzard conditions, disrupting travel and prompting Massachusetts’ governor to declare a state of emergency.

Colder weather is also forecast in Germany, Europe’s biggest heating oil market. Temperatures in Berlin, the capital, will fall below freezing next week.

The World Bank said in a report today that China’s economy will grow 8.7 percent in 2011, boosting oil demand in the world’s biggest energy consumer.

U.S. crude stockpiles fell 2.15 million barrels to 333.1 million in the week ended Jan. 7, the Energy Department said yesterday. Supplies have fallen 7.4 percent in the past six weeks even as imports increased.

Product Supplies Increase

Gasoline stockpiles rose 5.08 million barrels to 223.2 million, the biggest gain since September 2009, the department said. Supplies were forecast to climb 2.1 million, based on the median estimate of 18 analysts surveyed by Bloomberg News.

Distillate fuel inventories, including heating oil and diesel, increased 2.65 million barrels to 164.8 million, the Energy Department said. A median 1 million-barrel gain was predicted by analysts.

“U.S. crude inventory levels are historically high, therefore the situation is not so changed from before,” said Ken Hasegawa, a Tokyo-based commodity derivatives sales manager at Newedge, a broker. “I don’t think there are many people who want to take long positions at these levels. Still, it’s not over yet, it’s possible for the market to try to touch $100 today or tomorrow.”

To contact the reporter on this story: Ayesha Daya in Abu Dhabi at adaya1@bloomberg.net.

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

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