Oil Trades Near Four-Month High Before Vote on U.S. Debt

Oil traded near the highest price in four months in New York on speculation that the U.S. will lift its debt limit, offsetting forecasts that fuel inventories increased in the world’s largest crude consumer.

West Texas Intermediate was little changed after gaining 0.7 percent yesterday as President Barack Obama’s administration said it welcomes a move by House Republicans to vote today on raising the debt ceiling through mid-May. U.S. crude stockpiles probably rose last week, according to a Bloomberg News survey before a government report tomorrow. Deutsche Bank AG boosted its growth forecast for oil demand in China.

“We expect some jitters in oil prices leading up to discussion of the debt ceiling,” said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark, “U.S. politicians will probably reach a deal that kicks the much-dented can down the road. A real structural reform looks a bit unlikely.”

WTI crude for March delivery gained 7 cents to $96.75 a barrel in electronic trading on the New York Mercantile Exchange at 1:12 p.m. London time. The average volume of all futures traded was 17 percent below the 100-day average. The February contract expired yesterday at $96.24, the highest close since Sept. 17, 2012.

Brent for March settlement was at $112.56 a barrel, up 14 cents, on the London-based ICE Futures Europe exchange. The volume of futures exchanged was 21 percent more than the 100-day average. The European benchmark contract traded at a premium of $15.82 to WTI. The gap was $15.16 on Jan. 17, the narrowest in almost six months.

U.S. Pipeline Capacity

Brent’s premium to WTI will be in a range of $15 to $19 a barrel in the first quarter before falling to about $6 to $12 in the fourth quarter as new pipeline capacity begins to affect supplies at Cushing, Oklahoma, Hussein Allidina, an analyst at Morgan Stanley (MS), said today in a report.

The increase in WTI is stalling as a technical indicator shows futures have climbed too quickly for further gains to be sustainable. The 14-day relative strength index is higher than 70 for a fourth day today, according to data compiled by Bloomberg. A reading above that level signals a market is overbought and will probably decline.

U.S. crude stockpiles probably rose by 2.5 million barrels to 362.8 million in the seven days ended Jan. 18, according to the median of seven analyst estimates before a report from the Energy Department. All respondents forecast a gain.

U.S. gasoline stockpiles probably rose by 1.5 million barrels, and distillate supplies, a category that includes heating oil and diesel, increased by 500,000 barrels, according to the survey.

Chinese Demand

The government data is being released a day later than usual because of the Martin Luther King Jr. Day holiday on Jan. 21 in the U.S. The industry-funded American Petroleum Institute is scheduled to release separate inventory figures today.

In China, fuel demand will increase by 4.9 percent this year, equivalent to about 468,000 barrels a day, amid planned investments in new infrastructure, Soozhana Choi, Deutsche Bank’s chief oil strategist in Singapore, wrote in a report.

Oil prices increased yesterday after Germany’s ZEW Center said its index, which tries to predict economic developments six months in advance, jumped to 31.5 from 6.9 in December. Economists forecast an increase to 12, the median of 39 estimates in a Bloomberg News survey show.

To contact the reporters 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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