Oil rose for a second day in London after German and French leaders said they’re certain Greece will remain in the euro zone, tempering concern that the region’s debt crisis will damage fuel consumption.
Brent futures advanced as the dollar weakened against the euro, bolstering the appeal of commodities to protect against inflation. Goldman Sachs Group Inc. affirmed its forecast that oil in London will rally to $130 a barrel next year. The International Energy Agency said it has finished the program of stockpile releases intended to compensate for supplies lost from Libya. Oil pared gains in New York after applications for U.S. unemployment benefits unexpectedly rose.
“Oil is supported, like the equity markets, by everybody’s hope that the crisis could ease,” said Gerrit Zambo, trader at Bayerische Landesbank in Munich, who predicts Brent will drop toward $100 a barrel. “If you look at the big picture of macroeconomic data, there can only be one direction for oil in the medium term, and that’s to the downside.”
Brent oil for October settlement on the London-based ICE Futures Europe exchange advanced as much as $2.45, or 2.2 percent, to $114.85 a barrel. It was at $114.43 a barrel at 1:38 p.m. London time. The contract expires today. The more active November future was up $1.97 at $111.62.
Crude for October delivery on the New York Mercantile Exchange was up 10 cents at $89.01 after rising as much as 70 cents to $89.61 a barrel. Brent was at a premium of $25.34 to U.S. prices, compared with $23.72 at yesterday’s settlement and a record close of $26.87 on Sept. 6.
Brent Decline Likely
Commerzbank AG, HSBC Holdings Plc and Credit Agricole CIB said in reports today that Brent, which has gained 21 percent this year, is likely to decline as a resumption of output from Libya becomes more likely.
Brent will probably fall to $100 a barrel by the end of the year, analysts at Commerzbank AG said, while Christophe Barret, a London-based analyst at Credit Agricole CIB, predicted it will drop to $92 a barrel in the fourth quarter. HSBC sees the grade declining to about $90 a barrel next year on ample supplies.
Jobless claims climbed by 11,000 to 428,000 in the week ended Sept. 10 that included the Labor Day holiday, figures from the Labor Department showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 411,000, according to the median forecast.
“Oil prices should continue to correct downward in the next few weeks, in particular if progress continues on the Libyan front,” Credit Agricole’s Barret wrote.
The euro strengthened for a second day after French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are “convinced” Greece will stay in the currency union. The currency gained 0.3 percent to $1.3796.
The Energy Department said yesterday gasoline supplies rose the most since June while fuel use slumped by 3.8 percent. Gasoline supplies rose by 1.94 million barrels last week, leaving stockpiles 3.4 percent higher than the five-year average, Energy Department data showed.
Consumption of the motor fuel dropped 1.2 percent to 8.85 million barrels a day in the week ended Sept. 9, the lowest since May, the report showed. Supplies of distillate fuel, including heating oil and diesel, rose by 1.71 million barrels to 158.8 million, the highest since February.
“The risks of a recessionary event have increased,” Allison Nathan, a commodities analyst at Goldman Sachs Group Inc., told reporters in Singapore today. While Goldman affirmed its forecast that Brent will rally to $130 a barrel next year as emerging markets drive demand for raw materials, “risks to keeping our constructive view have increased,” Nathan said.
Total crude inventories slid 6.7 million barrels to 346.4 million as Tropical Storm Lee closed platforms in the Gulf of Mexico, which accounts for 27 percent of U.S. supply. As much as 61 percent of production was shut, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.
Tropical Storm Maria may become a hurricane today as it passes west of Bermuda, according to the U.S. National Hurricane Center. It may strike Newfoundland tomorrow, the Canadian Hurricane Center said. Canadian offshore facilities operated by Exxon Mobil Corp., Royal Dutch Shell Plc and Hibernia Management & Development Co. are close to the storm’s projected path, Bloomberg data show.
Maria’s top winds were at 65 miles (100 kilometers) per hour, the hurricane center said in an advisory before 8 a.m. Miami time. The storm was 200 miles west-southwest of Bermuda moving north-northeast at 26 mph, the center said.
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