Oil Heads for First Weekly Drop Since September on European Debt Concern
Oil rose in New York as the euro strengthened amid speculation that European Central Bank buying of Italian and Spanish bonds will stem surging borrowing costs and mitigate the effects of the region’s debt crisis.
Futures rose as much as 1.4 percent, after dropping 3.7 percent yesterday. The euro advanced against the dollar while Italian and Spanish lending costs declined, following reports the European Central Bank bought the nations’ bonds. Oil, up 1 percent this week, is headed for its seventh straight weekly gain, the longest run in more than two years.
“The physical oil market remains fairly tight, which keeps supporting the market,” said James Zhang, London-based commodity strategist at Standard Bank Plc. “It also benefits from a recovery in euro.”
Crude for December delivery on the New York Mercantile Exchange rose as much as $1.35 to $100.15 a barrel and was at $99.95 as of 1:50 p.m. London time. The contract, which yesterday dropped $3.77 to $98.82, expires today. The more- active January contract gained $1.19 to $100.12 a barrel.
Brent oil for January settlement gained $1.21 to $109.43 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to U.S. futures widened to $9.31 a barrel from $9.29 at yesterday’s settlement.
The euro gained as much as 1.2 percent against the dollar, after weakening yesterday to its lowest rate in more than a month, even as ECB President Mario Draghi called on politicians to accelerate the implementation of agreed reforms of the region’s rescue fund, signaling an unwillingness to expand bond purchases. A weaker dollar increases the appeal of commodities priced in the U.S. currency.
New York crude may fall next week on heightened concern that Europe’s debt crisis is spreading and will hurt demand, according to a Bloomberg News survey. Eighteen of 36 analysts, or 50 percent, forecast oil will fall through Nov. 25. Eleven predicted a gain, and seven said there will be little change. Last week, 58 percent of those surveyed projected a drop.
Crude supplies at Cushing, Oklahoma, the delivery point for U.S. futures, were at 32 million barrels last week, compared with this year’s high of 41.9 million in the week ended April 8, according to data compiled by Bloomberg.
Applications for jobless benefits decreased 5,000 in the week ended Nov. 12 to 388,000, the Labor Department said yesterday. Housing starts decreased 0.3 percent to a 628,000 annual rate in October, according to the Commerce Department. The median estimate of economists surveyed by Bloomberg News called for a drop to 610,000. Building permits, a proxy for future construction, jumped 10.9 percent.
To contact the editor responsible for this story: Stephen Voss at firstname.lastname@example.org