Heating Oil Rises on Speculation of Further Economic Stimulus
Heating oil surged to a six-week high on speculation China’s slowest expansion in three years may prompt policy makers to add economic stimulus.
Futures gained 0.8 percent as Chinese gross domestic product expanded at a three-year-low 7.6 percent last quarter from a year earlier, the National Bureau of Statistics said. Refinery rates in China slowed and power output stalled. Futures widened gains as stocks rallied and the euro rebounded from two- year lows against the dollar.
Heating oil for August delivery rose 2.2 cents to $2.7953 a gallon at 1:41 p.m. on the New York Mercantile Exchange. Prices touched $2.808, the highest intraday level since May 30. Futures have gained 3.2 percent this week.
Premier Wen Jiabao pledged to intensify fine-tuning of policies as downward pressure on the economy remains “relatively large,” according to a July 8 report by the official Xinhua News Agency. First-half expansion was 7.8 percent, the statistics bureau said. Wen in March set a 7.5 percent growth target for this year, down from an 8 percent goal in place since 2005.
“Even though the Chinese GDP data is less than it has been, the market still likes that it is at least 7 percent,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Chinese refining slid to 8.79 million barrels a day last month, the least since October and down 3.4 percent from May, according to the statistic bureau. Electricity generation was unchanged in June from a year earlier at 393.4 billion kilowatt- hours, the bureau’s data showed.
Federal Reserve Bank of Atlanta PresidentDennis Lockhart said the central bank may need to initiate a new program of asset purchases if recent economic weakness persists and undermines his forecast for a pickup in the second half of the year.
The policy-making Federal Open Market Committee voted last month to extend its maturity extension program, known as Operation Twist, and said it would consider additional stimulus if needed.
“The oil market is very strong on the equities and the talk of stimulus,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “We’re looking for a little bit of hope here.”
The euro rose 0.3 percent against the dollar on speculation of more global stimulus and as Medley Global Advisors predicted the European Central Bank will ease monetary policy further. A weaker dollar increases the investment appeal of commodities.
August-delivery gasoline gained 0.85 cent, or 0.3 percent, to $2.8147 a gallon on the exchange. Futures touched $2.8291, the highest intraday level since May 31. Prices are up 3.6 percent this week.
Regular gasoline at the pump, averaged nationwide, rose 0.4 cent yesterday to $3.388 a gallon, according to AAA. It was the highest price since June 25. Gasoline reached a year-to-date high of $3.936 on April 4.
To contact the reporter on this story: Barbara J Powell in Dallas at firstname.lastname@example.org
To contact the editor responsible for this story: Bill Banker at email@example.com