Oil Rebounds From Biggest Drop in Three Weeks on Economy Hopes

Oil rebounded from its biggest decline in more than three weeks amid speculation that economic data from Japan and the U.S. signal increasing demand for fuel.

Crude rose as much as 1.1 percent, following a 3.3 percent drop on Nov. 12, after reports showed gross domestic product in Japan grew more than forecast in the third quarter and U.S. retail sales climbed more than forecast in October.

“Stronger-than-expected GDP data out of Japan is supporting the outlook for oil demand this morning, helping the market recover from the carnage at the end of last week,” said Robert Montefusco, senior broker with Sucden Financial in London.

Oil for December delivery rose as much as 89 cents to $85.77 a barrel on the New York Mercantile Exchange and was at $85.43 at 1:38 p.m. London time. Brent crude for December settlement was up 73 cents at $87.07 on the ICE Futures Europe exchange in London. The December Brent contract expires today. The more actively traded January future was up 62 cents at $87.15 a barrel.

Japan’s economy increased an annualized 3.9 percent in the three months ended Sept. 30, the Cabinet Office said in Tokyo today. The median forecast of 21 economists surveyed by Bloomberg News was for a 2.5 percent gain. Japan is the world’s third-largest oil consumer, after the U.S. and China.

“It gives further evidence of that Asian recovery,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “You’ve seen the recovery in China and the positive spill-over effects for those economies in the Asian region. Up until now, you haven’t really seen it as much in Japan.”

U.S. Retail Sales

U.S. retail sales rose 1.2 percent in October, the biggest gain since March, following a 0.7 percent September increase that was larger than previously estimated, Commerce Department figures showed today. The median estimate of 74 economists surveyed by Bloomberg News projected a 0.7 percent advance.

Oil dropped 2.3 percent last week on speculation China will raise interest rates, damping growth in the world’s biggest energy consumer. Such steps to cool the economy may damp fuel prices, according to John Vautrain, a senior vice president at energy consultants Purvin & Gertz Inc. in Singapore.

“The Chinese government is interested in tapering the economy a bit,” he said.

Chinese demand for fuel has surged this year. Oil processing rose to a record last month after refiners increased production to ease a domestic fuel shortage. Plants refined 37 million metric tons, or about 8.8 million barrels a day, in October, up 12 percent from a year earlier, China Mainland Marketing Research Co. said Nov. 11.

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