Oil Rises After Biggest Loss in Week; Goldman Sachs Boosts Price Forecast
Oil Rises After Biggest Loss in Week
David Paul Morris/Bloomberg
Gasoline demand typically jumps from the Memorial Day holiday as motorists take to the roads for summer vacations.
Gasoline demand typically jumps from the Memorial Day holiday as motorists take to the roads for summer vacations. Photographer: David Paul Morris/Bloomberg
Oil rose in New York after its biggest loss in more than a week, on signs of shrinking crude inventories and as a drop in the dollar heightened the oil’s appeal for protecting against inflation.
Goldman Sachs Group Inc. and Morgan Stanley increased their oil-price forecasts as conflict in Libya prolonged the loss of supplies. An Energy Department report tomorrow may show U.S. crude inventories fell last week. Gasoline demand typically jumps from the Memorial Day holiday as motorists take to the roads for summer vacations. Oil also gained as the dollar weakened versus the euro after data showed Germany’s economy grew at the fastest pace in almost a year.
“Oil fundamentals remain extremely constructive,” Amrita Sen, an analyst at Barclays Capital in London, said in Bloomberg television interview with Francine Lacqua. “Libyan supply is not going to come back to the market anytime soon. We should get a good Memorial Day driving season in the U.S.”
Crude for July delivery rose as much as $1.47, or 1.5 percent, to $99.17 a barrel in electronic trading on the New York Mercantile Exchange, and was at $99.01 at 1:30 p.m. London time. It tumbled $2.40 yesterday, the biggest drop since May 11. Prices are up 41 percent from a year earlier.
Brent crude for July settlement gained $1.55, or 1.4 percent, to $111.30 a barrel on the London-based ICE Futures Europe exchange. Prices are up 57 percent the past year.
‘Matter of Time’
“It is only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supplies,” Goldman Sachs analysts led by New York- based David Greely said in a note e-mailed today.
Crude exports from Libya, holder of Africa’s biggest reserves, slumped 79 percent in March from February, as political unrest curbed shipments, official data posted on the Joint Organization Data Initiative website showed May 18.
Morgan Stanley increased its average forecast for Brent this year by 20 percent to $120 a barrel and by 24 percent for 2012 to $130 a barrel. Goldman Sachs raised its 12-month price estimate for the European benchmark to $130 a barrel and recommended investors buy Brent for settlement in December 2012.
Petromatrix GmbH, a consultant based in Zug, Switzerland, said that prices cannot sustain levels of $130 a barrel because the burden of higher fuel costs would reduce demand, according to consultants.
“What we know from 2008 and early 2011 is that, at $130, there is demand destruction,” Olivier Jakob, Petromatrix’s Zug- based managing director, said in a report. “The sustainability of those price levels is difficult due to demand destruction.”
Brent traded at a premium of $12.69 a barrel to U.S. futures, compared with $12.40 yesterday. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21. It averaged 76 cents last year.
OPEC Help
The Organization of Petroleum Exporting Countries meets in Vienna on June 8. The International Energy Agency’s statement last week on a “clear, urgent need for additional supplies” suggests it may coordinate the release of emergency oil stockpiles if OPEC doesn’t raise production, the London-based Centre for Global Energy Studies said in a report yesterday.
“OPEC has probably got room to increase production, so if the market is tight in any way they can come in and help,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who predicted oil will average $115 this year.
Brent crude has climbed 18 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya, Iran and Syria.
Oil Inventories
U.S. crude stockpiles dropped 1.9 million barrels last week from 370.3 million, according to the median of 11 analyst estimates in a Bloomberg News survey. Gasoline supplies probably gained 500,000 barrels, the survey showed. The industry-funded American Petroleum Institute will report its own data today.
The euro climbed 0.2 percent to $1.4081 as of 1:32 p.m. London time, after earlier weakening to $1.4002. German gross domestic product increased 1.5 percent when adjusted for seasonal swings, in line with a May 13 estimate.
At least one person was killed and 25 hurt in a fire and explosion at a refinery in Abadan, Iran, during a visit by President Mahmoud Ahmadinejad, state news agencies reported.
The fire occurred in one wing of the facility and was extinguished immediately, the state-owned Fars agency said today.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
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