Oil Rises to Three-Month High as China Exports Accelerate

Oil rose to the highest level in three months as exports from China accelerated and European Central Bank President Mario Draghi said “a gradual recovery should start” in the region this year.

Prices advanced 0.8 percent after China’s customs agency said overseas sales in the world’s second-largest fuel-consuming country jumped 14.1 percent last month from a year earlier. Oil also gained as the euro surged against the dollar on Draghi’s remarks.

“We are breaking out on the back of the incredibly strong export data from China that clearly argue for an enhanced demand picture for 2013,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The comments by Draghi about the economy are positive. The euro is mostly definitely helping oil.”

Crude oil for February delivery gained 72 cents to $93.82 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 18. Trading volume was 47 percent more than the 100-day average.

Brent oil for February settlement increased 13 cents to $111.89 a barrel on the London-based ICE Futures Europe exchange. Volume was 60 percent above the 100-day average. Brent’s premium to New York futures narrowed 59 cents to $18.07 a barrel, the narrowest spread since Sept. 24.

Chinese Exports

Chinese December exports exceeded the 5 percent median forecast in a Bloomberg survey of 40 economists. Exports for all of 2012 rose 7.9 percent, according to the Beijing-based General Administration of Customs. The country’s December trade surplus almost doubled from a year earlier to $31.6 billion.

China imported 271 million metric tons of crude last year, 6.8 percent more than in 2011, the customs agency reported. It ranks behind only the U.S. in term of oil consumption.

“Oil is rising because of the good news from China, the growing exports,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It definitely gives a bullish flavor to the market.”

European bond markets will stabilize this year after three years of turmoil as the euro-area economy recovers, Draghi said at a press conference in Frankfurt today after policy makers kept their benchmark interest rate at 0.75 percent.

“We have signs that fragmentation is being gradually repaired,” he said.

Spanish Bonds

The euro rose as much as 1.5 percent against the dollar on Draghi’s remarks and as Spain sold more than the maximum target at its first debt auction of the year. A stronger common currency and weaker dollar boost oil’s appeal as an investment alternative.

Spain’s 10-year borrowing costs, which hit a euro-era record of 7.75 percent in July, fell below 5 percent today for the first time since March.

The “sub-5 percent” yield is “an unbelievable turn of events in just several months,” Kilduff said. “There are a lot of positive aspects out there today.”

Oil also gained as Saudi Arabia reduced production in December to a 19-month low, according to a Gulf official with knowledge of the kingdom’s energy policy.

Saudi Arabia cut production by 4.9 percent to 9.025 million barrels a day in December, said the official, who asked not to be identified because the information is confidential.

OPEC Output

The 465,000-barrel-a-day reduction is the largest monthly drop since November 2008. Societe Generale SA (GLE) and the Centre for Global Energy Studies have said the Organization of Petroleum Exporting Countries needs to trim output to prevent markets from being oversupplied. Saudi Arabia is OPEC’s largest oil producer.

“The Saudi Arabia news will reinforce the bullish mood,” Lynch said.

Oil reduced gains as more Americans than forecast filed applications for unemployment benefits last week. Jobless claims increased by 4,000 to 371,000 in the week ended Jan. 5, higher than the 365,000 forecast by economists surveyed by Bloomberg, Labor Department data showed.

WTI slid in 2012 as the U.S. shale boom deepened a glut at Cushing, Oklahoma, America’s biggest storage hub and the delivery point for the New York contract. That left it at an average $17.48 a barrel below Brent last year, versus a premium of about 95 cents in the 10 years through 2010.

Electronic trading volume on the Nymex was 617,490 contracts as of 2:37 p.m. Volume totaled 470,459 contracts yesterday, 2.1 percent below the three-month average. Open interest was 1.48 million.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

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

Bloomberg reserves the right to edit or 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.