Oil Caps Weekly Gain on German Business Confidence

Oil capped the biggest weekly gain in more than a month as German business confidence unexpectedly rose in November, a signal Europe’s largest economy may expand.

Futures jumped 1 percent and the euro and equities rallied after the Munich-based Ifo institute’s business climate index climbed from the lowest level in two and a half years in October. Israeli troops fired on Palestinians near the Gaza Strip border, spurring accusations from both Israel and Hamas that a truce was breached.

“The economic data from Europe is increasing hopes that things will improve in the region,” and John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The shooting in Gaza is boosting concerns about whether the cease-fire will hold. As a result, the geopolitical premium isn’t leaving the market like expected.”

Crude oil for January delivery rose 90 cents to $88.28 a barrel on the New York Mercantile Exchange, the highest settlement since Nov. 6. Futures climbed 1.9 percent this week, the biggest gain since the five days ended Oct. 12. Prices are down 11 percent this year.

The exchange shut at 1:30 p.m. New York time today, an hour earlier than usual. There was no floor trading yesterday because of the U.S. Thanksgiving holiday and all electronic transactions were booked with today’s trades for settlement purposes.

Brent for January settlement increased 83 cents, or 0.8 percent, to $111.38 a barrel on the London-based ICE Futures Europe exchange. The contract gained 2.2 percent this week.

Business Confidence

German business confidence rose for the first time in eight months. The index climbed to 101.4 from 100 in October. Economists surveyed by Bloomberg forecast a drop to 99.5. French business confidence advanced from the lowest level in more than three years this month, a separate report showed today.

The euro advanced against the dollar and equities increased on the improving outlook. The common currency rose 0.7 percent to $1.2974. A stronger euro and weaker dollar increase the appeal of commodities as an investment. The Standard & Poor’s 500 Index gained 1.3 percent to 1,409.15, the highest close since Nov. 6.

“It will be hard for the price of a barrel to move lower with the S&P at 1,400,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.

Gaza Shooting

Hamas said the Israeli fire left one dead and 25 injured. Palestinian farmers were shot at on land they own near the Israel-Gaza border, said Ashraf al-Qedra, a spokesman for the Hamas-run Ministry of Health in Gaza.

Avital Leibovich, an Israeli army spokeswoman, said in a message on Twitter that the Palestinians breached the cease-fire by hurling stones and trying to damage the fence.

The shooting is the most serious episode of violence since Egypt brokered the cease-fire, announced late on Nov. 21 after eight days of airstrikes and missile fire in which 167 Palestinians and six Israelis were killed.

“There was a perception that crude would fall below $85 once there was a truce, but that’s not what happened,” Yawger said. “Any truce in that region can fall apart in 15 minutes.”

Futures touched $89.80 on Nov. 19, the highest intraday level since Oct. 22, on concern that violence in Gaza would spread, disrupting crude shipments from the surrounding region. The Middle East and North Africa accounted for 36 percent of global oil output and held 52 percent of proved reserves in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy.

OPEC Capacity

Members of the Organization of Petroleum Exporting Countries have the lowest level of spare crude oil production capacity since 2008, potentially buoying oil prices, Oswald Clint, an analyst Sanford C. Bernstein and Co.in London, said in a report today.

OPEC has 2.4 million barrels a day of effective spare capacity concentrated in Saudi Arabia, Bernstein said. That estimate excludes Nigeria, Iran, Libya, Iraq and Venezuela which may not be able to increase supply quickly enough to respond to outages and where production has been volatile over the last three years, according to the report.

Electronic trading volume on the Nymex was 145,016 contracts. Volume totaled 392,684 contracts on Nov. 21, the least since Oct. 30 and 26 percent lower than the three-month average. Open interest was 1.5 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 in New York at dstets@bloomberg.net.

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