Oil Trades Near Four-Month High on Signs of Improving Economy
Oil traded near the highest price in four months before reports forecast to show a strengthening economy in the U.S., the world’s biggest consumer of crude.
Futures were little changed in New York after surging as high as $100.42 a barrel on Sept. 14 as the Federal Reserve pledged to start buying U.S. mortgage securities. New home construction and sales of previously owned houses rose in August, economists said before U.S. data due Sept. 19. Current crude prices aren’t a threat to the world economy, said Mohammad Ali Khatibi, Iran’s governor to OPEC, according to the Oil Ministry’s news website.
“We’ve seen an ongoing and relatively positive reaction to the Fed’s easing plan,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “That reflects the relatively open-ended nature of the proposed easing.”
Oil for October delivery dropped 23 cent to $98.77 a barrel in electronic trading on the New York Mercantile Exchange at 3:37 p.m. Singapore time. The contract rose 0.7 percent to close at $99 on Sept. 14, the highest since May 3. Prices are up 0.2 percent this year.
Brent oil for November settlement was at $116.50 a barrel, down 16 cents, on the London-based ICE Futures Europe exchange. The front-month premium for the European benchmark contract to West Texas Intermediate was at $17.35, up from $17.33.
Hedge funds raised bullish bets on oil to a four-month high before futures surged on Federal Reserve Chairman Ben S. Bernanke’s plan for a new round of measures to boost economic growth. Money managers increased net-long positions, or wagers on rising prices, by 5 percent in the seven days ended Sept. 11, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Sept. 14. They were at the highest level since the week ended May 1.
U.S. housing starts in August increased to an annual rate of 765,000, the fastest in almost four years, from 746,000 in July, according to the median forecast in a Bloomberg survey before the Commerce Department report. Existing-home purchases advanced to a three-month high, economists said before data from the National Association of Realtors.
Most oil-consuming nations consider prices at $100 a barrel to be “fair,” Khatibi said in a report published by the Shana website yesterday. Iran, the third largest producer in the Organization of Petroleum Exporting Countries, is grappling with international sanctions imposed by Western countries that allege the nation is building nuclear weapons.
South Korea stopped buying crude from Iran in August after its refiners lost insurance coverage on ships carrying supplies from the Persian Gulf nation.
Purchases fell to zero last month, reducing imports from Iran for the first eight months of this year by 34 percent from a year earlier to 5.39 million metric tons, according to data posted on the Customs Service’s website Sept. 15. South Korea bought 1.14 million tons of crude oil, or about 270,000 barrels a day, in August 2011.
To contact the reporter on this story: Ben Sharples in Melbourne at email@example.com