Oil Trades Near Three-Week High on Stimulus Outlook

Oil traded near the highest level in three weeks amid speculation China and the U.S. will add stimulus to their economies, sustaining demand for fuel in the world’s biggest crude-consuming nations.

Futures were little changed after rising for a fifth day yesterday, the longest run of gains since July. Chinese Premier Wen Jiabao said the government has more room for fiscal and monetary policy to support growth. The Federal Open Market Committee starts a two-day meeting today, where it may announce measures to stimulate the U.S. economy. The country’s crude stockpiles probably fell 2.9 million barrels last week, according to a Bloomberg News survey of analysts before an Energy Department report.

“The premier’s comments are supportive for the oil market,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “With the Fed, the issue is what they do and how big it’s going to be. Without supply shocks, we are probably fairly close to the top end of the range for oil.”

Crude for October delivery was at $97.39 a barrel in electronic trading on the New York Mercantile Exchange, up 22 cents, at 3:09 p.m. Singapore time. The contract yesterday rose 0.7 percent to $97.17, the highest close since Aug. 22. Prices are 1.5 percent lower this year.

Brent oil for October settlement on the London-based ICE Futures Europe exchange climbed 45 cents to $115.85 a barrel. The European benchmark crude was at a premium of $18.47 to New York-traded West Texas Intermediate grade, from $18.23 yesterday.

‘Ample Strength’

The price difference between the world’s two most-traded varieties of crude, which widened to $21.92 a barrel last month, is narrowing as North Sea production rebounds from the lowest in five years. Daily exports of the four crude grades comprising the Dated Brent benchmark will increase 24 percent in October, the most in two years, as maintenance work ends, data compiled by Bloomberg shows.

China has “ample strength” for preemptive fiscal and monetary measures, Wen said at the World Economic Forum in Tianjin yesterday. The government is trying to prevent growth this year from slipping below the 7.5 percent target set in March, which would already be the weakest since 1990.

Fed Chairman Ben S. Bernanke said on Aug. 31 that he wouldn’t rule out more economic stimulus for the U.S. The central bank bought a total of $2.3 trillion in bonds from December 2008 to June 2011 in two rounds of asset purchases known as quantitative easing.

“The market is waiting on the outcome of the FOMC meeting and data from the Energy Department,” said David Lennox, an analyst at Fat Prophets in Sydney.

Supplies ‘Abundant’

Oil in New York dropped as much as 0.5 percent today after the industry-funded American Petroleum Institute said crude stockpiles rose 221,000 barrels last week. Gasoline inventories declined 4.16 million barrels last week to 197.7 million, the lowest since October 2008, and distillate-fuel inventories were up 2.55 million, the API report showed.

Oil supplies are abundant and consumption will slow next year, according to the Organization of Petroleum Exporting Countries. Global demand will climb by an average 800,000 barrels a day to 89.55 million a day in 2013, OPEC said in its monthly report yesterday. Demand is forecast to increase 900,000 barrels a day to 88.74 million this year. The group estimates its 12 members will need to pump an average of 29.5 million barrels a day next year, or 1.9 million less than current output.

West Texas crude will average $93.67 a barrel in the final three months of this year, the Energy Department said in its Short-Term Energy Outlook yesterday. Prices will average $92.63 next year, it predicted.

Oil in New York has technical resistance along the upper Bollinger Band on the daily chart, around $99.37 a barrel today, according to data compiled by Bloomberg. Futures have halted advances near this indicator since July. Sell orders tend to be clustered near chart-resistance levels.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net

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