Crude Increases on Signs of Demand Growth From China to U.S.

Oil rose for a second day in New York, extending gains into the fifth week in six as signs of economic growth in the U.S. and China stoked speculation that fuel demand will grow.

Futures advanced as much as 0.6 percent after the Federal Reserve reported Dec. 14 that industrial output in the U.S. climbed by the most in two years in November. A preliminary purchasing managers’ index showed manufacturing in China expanded at a faster pace this month. Syrian fighter jets bombed a Palestinian camp in Damascus, reviving concern that unrest in the Middle East may spread to oil-producing countries.

“A positive outlook for global growth is confirmed by those numbers out of the U.S. and China,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “That’s also supportive of oil prices around the globe.”

West Texas Intermediate crude for January delivery was at $86.88 a barrel, up 15 cents, in electronic trading on the New York Mercantile Exchange at 4:26 p.m. Singapore time. Front- month prices advanced 0.9 percent for the week ended Dec. 14.

Brent for February settlement fell 2 cents to $108.17 a barrel on the London-based ICE Futures Europe exchange. The January contract settled $1.24 higher at $109.15 when it expired Dec. 14. The European grade was at a premium of $20.78 to WTI, down from $22.42 on Dec. 14.

U.S. Factory Output

WTI has fallen 12 percent in 2012 as the U.S. shale boom deepened the glut at Cushing, Oklahoma, America’s biggest storage hub and the delivery point for Nymex futures. That has left it at an average discount of $17.36 to Brent this year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, has risen 0.9 percent this year.

Money managers lowered net-long positions, or wagers on higher U.S. oil prices, by 21 percent in the seven days ended Dec. 11, according to the Commodity Futures Trading Commission’s Dec. 14 Commitments of Traders report. It was the biggest drop since the week ended May 8.

Output at U.S. factories, mines and utilities increased 1.1 percent last month after a revised 0.7 percent drop in October that was more than initially estimated, the Fed reported. Economists forecast a 0.3 percent advance, according to a Bloomberg survey. Manufacturing also surged 1.1 percent in November, the most this year.

In China, a preliminary purchasing managers’ index by HSBC Holdings Plc and Markit Economics indicated a reading of 50.9, for December, higher than a median estimate of 50.8 in a Bloomberg survey. It followed a reading of 50.5 in November, which was above the expansion-contraction dividing line of 50 and was the first growth in 13 months.

Syria Fighting

China will consume 9.9 million barrels a day of oil, 115,000 more than previously projected, in the last three months of this year, the International Energy Agency said in a Dec. 12 monthly report.

“Demand is affected by the good numbers for manufacturing in the U.S. and China,” Fahad Alturki, Riyadh-based senior economist at Jadwa Investment Co., said in a telephone interview yesterday.

The aerial bombardment of the Yarmouk camp in Damascus killed eight civilians, the U.K.-based Syrian Observatory for Human Rights said on its Facebook Inc. page. Forces loyal to President Bashar al-Assad are battling to defend military barracks, heavy weapons, oilfields and roads across the country against well-armed rebels.

The uprising against al-Assad began in March 2011. Former Egyptian President Hosni Mubarak was ousted in February 2011 in the wake of popular demonstrations, while Libyan leader Muammar Qaddafi was toppled and killed last October after seven months of fighting that all but froze exports from North Africa’s biggest crude producer. The Middle East and North Africa account for more than a third of global oil production.

To contact the reporters on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net; Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.