Oil rebounded from its lowest in almost two weeks as growing confidence in the economic recovery made yesterday’s price slump appear excessive.
Crude pared its third weekly decline in four as German business confidence unexpectedly rose to a record high in January amid booming exports to Asia. French business confidence jumped to its highest in almost three years. Oil may still fall next week on speculation China, the world’s largest energy user, will raise interest rates to combat inflation, according to a Bloomberg News survey.
“The oil market oversold yesterday,” said Robert Montefusco, a senior broker at Sucden Financial in London. “Crude’s back up today as the economic growth outlook remains strong, the euro is holding up, and we have some technical buying. But with the spectre of a Chinese rate hike on the horizon, there are still worries out there.”
Crude for March delivery rose as much as 63 cents, or 0.7 percent, to $90.22 a barrel in electronic trading on the New York Mercantile Exchange. It was at $89.93 at 12:34 p.m. London time. Prices slid 2.2 percent yesterday, the most since Jan. 4. Brent crude for March settlement was at $97.23, up 65 cents on the London-based ICE Futures Europe exchange.
Prices in New York have fallen 3 percent this week. The February contract expired yesterday after dropping 2.2 percent to $88.86, the lowest since Jan. 7.
Twenty-three of 40 analysts and traders surveyed by Bloomberg, or 58 percent, forecast crude will decline through Jan. 28. Ten respondents, or 25 percent, predicted prices will climb and seven estimated little change. Last week, 43 percent said futures would retreat.
German Business Confidence
The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 110.3 from 109.8 in December. That’s the highest since records for a reunified Germany began in 1991. An index of sentiment among French factory managers rose more than expected to 108 from a revised 102 in December, Insee, the Paris-based national statistics office said today.
U.S. crude inventories increased 2.62 million barrels to 335.7 million in the week ended Jan. 14, the Energy Department said yesterday. A median 500,000-barrel decline in stockpiles was forecast by 17 analysts in a Bloomberg News survey.
Refiners cut average operating rates by 3.4 percentage points to 83 percent of capacity, according to the department. Crude imports rose to the highest since December.
Yesterday’s drop put crude’s five-day rolling mean below the nine-day for the first time since Jan. 4. The decline of a short-term indicator of momentum before a longer-term measure is described as a “dead cross” and may be a sign that prices may correct lower, according to Petromatrix GmbH.
“Brent and WTI are now suffering from a negative cross-over of the five to nine day moving average, and bulls will need to close today above the five-day,” Olivier Jakob, managing director of the Zug, Switzerland-based consultant, said in a report today.
Brent crude futures in London yesterday fell the most since November after trading for seven days within 2 percent of $100 a barrel. That price is “politically sensitive,” according to JPMorgan Chase & Co. , the second-largest U.S. bank by assets.
JPMorgan said oil investors should “pare risk and take some profits” on prospects the Organization of Petroleum Exporting Countries may increase production. OPEC pumps 40 percent of the world’s crude.