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Oil Little Changed on Equity Gain, Economic Outlook

Oil was little changed in New York as advancing equities countered concern that the global economy is weakening. West Texas Intermediate crude, the U.S. benchmark, traded at the greatest discount to Brent in a year.

WTI erased most losses after the Standard & Poor’s 500 Index increased and Brent oil from the North Sea climbed before the November contract expires tomorrow. Prices slipped as much as 2.3 percent earlier as a manufacturing index in the New York region contracted for a third straight month in October.

“The S&P gain and tightness in the Brent market ahead of expiration are helping boost WTI,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Market sentiment itself is weighing on prices.”

Crude oil for November delivery fell 1 cent to settle at $91.85 a barrel on the New York Mercantile Exchange. Prices are down 7.1 percent this year.

Brent oil for November settlement rose $1.18, or 1 percent, to end the session at $115.80 a barrel on the London-based ICE Futures Europe exchange. The more-active December contract gained 79 cents, or 0.7 percent, to $114.40.

The European benchmark ended trading at a $23.95 premium to the New York-traded West Texas Intermediate grade, up from $22.76 on Oct. 12. It was the widest since Oct. 14, 2011.

The spread between the grades may narrow as U.S. Gulf Coast refiners resume operations after maintenance and as North Sea production climbs with the end of work on oil fields, Hussein Allidina, the head of commodities research at Morgan Stanley, said in a report dated today.

Retail Sales

Stocks climbed after September American retail sales topped estimates. The S&P 500 (SPX) increased 0.8 percent and the Dow Jones Industrial Average advanced 0.7 percent.

The 1.1 percent advance in retail sales followed a revised 1.2 percent gain in August, the best back-to-back showing since late 2010, the Commerce Department said today in Washington. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise.

The Federal Reserve Bank of New York’s general economic index missed analysts’ expectations. It was minus 6.2 in October. The median forecast of 46 economists in a Bloomberg survey called for a gain to minus 4. The figure was minus 10.4 in September, the lowest level since April 2009. The index covers New York, northern New Jersey and southern Connecticut.

“The economic outlook is worrying and that has hit the demand side of the equation,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.

China’s inflation was close to the slowest pace in two years in September. Consumer prices rose 1.9 percent from a year earlier while the producer-price index dropped 3.6 percent, the National Bureau of Statistics said on its website today.

Biggest Consumers

“The New York Fed numbers highlight concerns about slow economic growth and the very challenged demand outlook,” said John Kilduff, a partner at Again Capital LLC, a New York-based energy hedge fund. “The market didn’t like the Chinese numbers over the weekend either.”

The U.S. and China are the world’s biggest oil-consuming countries, together accounting for 32 percent of global demand in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy released in June.

The International Monetary Fund this month cut its global growth forecasts as the euro area’s debt crisis intensifies. The IMF said Oct. 9 that the global economy will expand 3.3 percent this year, less than the July estimate of 3.5 percent. The IMF warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.

Tighter Sanctions

The European Union tightened sanctions today on Iran in a bid to persuade Tehran to permit more international scrutiny of its nuclear program and avert a possible military conflict.

EU foreign ministers in Luxembourg approved extra curbs on trade with Iran and on its finance, energy and transport industries following an oil embargo and central-bank asset freeze earlier this year. The ministers also froze assets of 34 Iranian entities.

Turkey is buying more oil from Russia and Saudi Arabia as it seeks to extend an exemption granted by the U.S. for purchases from Iran, Energy Minister Taner Yildiz said. Turkey’s exemption to continue buying Iranian crude amid sanctions against the Persian Gulf country expires on Dec. 6. Turkey is in talks with the U.S. and expects a dispensation, Yildiz said.

Iran is ready to enter talks about its nuclear program in exchange for guaranteed supplies of 20 percent-enriched uranium for its Tehran Research Reactor, said Ramin Mehmanparast, a Foreign Ministry spokesman, according to a Press TV report yesterday.

Iranian Output

Iran pumped 2.85 million barrels of oil a day in September, down 735,000 barrels from a year earlier, a Bloomberg survey of oil companies, producers and analysts showed. The Islamic republic became the third-biggest producer in the Organization of Petroleum Exporting Countries in July, after Saudi Arabia and Iraq. Iran had been the second-biggest since May 2000.

Electronic trading volume on the Nymex was 565,394 contracts as of 4:13 p.m. Volume totaled 403,353 contracts Oct. 12, 23 percent below the three-month average. Open interest was 1.57 million.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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