Brent Oil Rises to Three-Month High on Chinese Growth

Oil rose to its highest level in almost three months in London amid signs of growth in China, the world’s second-largest fuel consumer, and as Saudi Arabia, the biggest crude exporter, reduced supplies.

Brent futures advanced as much as 1.4 percent to the highest since Oct. 18 after China’s customs agency reported overseas sales jumped 14 percent in December from a year earlier, exceeding the 5 percent median forecast in a Bloomberg survey. The nation imported 271 million metric tons of crude last year, 6.8 percent more than in 2011, according to the Beijing-based General Administration of Customs. Saudi Arabia reduced its crude production in December to a 19-month low, said a Gulf official with knowledge of the kingdom’s energy policy.

“The Chinese data is allaying concerns of a hard landing,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who predicts Brent crude may advance to $115 a barrel this month. “Saudi Arabia will need to rein in output this year after making up for outages in 2012, and the latest numbers suggest they’re doing this.”

Brent for February settlement on the London-based ICE Futures Europe exchange rose as much as $1.53 to $113.29 a barrel. It was at $112.54 as of 1:29 p.m. local time. The European benchmark was at a premium of $18.41 to the U.S. benchmark, West Texas Intermediate, down from $18.66 yesterday.

WTI Crude for February delivery advanced as much as $1.60 to $94.70 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Sept. 19. Prices lost 7.1 percent in 2012 after three years of gains.

Saudi Cut

Saudi Arabia cut production by 4.9 percent to 9.025 million barrels a day in December, according to a Gulf official who asked not to be identified because the information is confidential. The cut of 465,000 barrels a day is the largest monthly drop since November 2008. Societe Generale SA and the Centre for Global Energy Studies have said the kingdom needs to trim output to prevent markets from being oversupplied.

A rebound in China’s trade may give policy makers more time to shift the economy toward domestic consumption to sustain expansion. Growth cooled to an estimated 13-year low in 2012 as Europe’s debt crisis crimped demand for Chinese goods.

“This is positive for commodities including oil demand,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong. “We continue to see outperformance for China through the first quarter as this cyclical recovery continues, but improved external demand would add to this bullishness.”

China’s crude imports increased at a faster rate last year than in 2011, while its daily net purchases in December were the fourth-highest in 2012.

Low Temperatures

Low temperatures in Frankfurt are forecast to drop to minus 9 degrees Celsius (16 Fahrenheit) on Jan. 16, from 4 degrees today, according to CustomWeather Inc. data on Bloomberg. Germany is Europe’s largest heating oil market.

Gasoil for February delivery rose $14.25, or 1.5 percent, to $963 a ton on the ICE exchange. It was as high as $965.50, the highest for the contract since Oct. 19.

Oil fell yesterday after the Energy Department report showed U.S. crude inventories rose 1.3 million barrels last week. U.S. gasoline stockpiles climbed for a seventh week to 233 million barrels, the highest since February 2011. Distillate supplies increased 6.8 million barrels, the most since May 1997, versus a forecast gain of 1.9 million.

Crude stockpiles at Cushing, Oklahoma, the delivery point for the WTI contract, were up for a fifth week to a record 50 million barrels, according to the Energy Department’s data.

“Inventories have been elevated for some time,” said David Lennox, an analyst at Fat Prophets in Sydney. “There might be a modest recovery in demand in the U.S. China will put further pressure on the demand side this year.”

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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