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Oil Trades Near One-Week High on Outlook for Economic Stimulus

Oil traded near the highest level in a week in New York amid speculation that the U.S. and China will implement measures to revive their economies.

Futures were little changed after three days of gains, the longest rising streak in three weeks. The Federal Reserve meets this week to discuss monetary policy after the European Central Bank agreed last week on bond purchases to ease the euro area’s debt crisis. Saudi Arabian Oil Minister Ali al-Naimi said supply, demand and inventories of crude don’t justify the current increase in prices, the Saudi Press Agency reported.

“The market is balancing hopes for a third round of quantitative easing and Chinese stimulus versus poor fundamentals,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt who predicts Brent crude may advance to $117 a barrel this week. “Market balances indicate an oversupply.”

Crude for October delivery was at $96.30 a barrel in electronic trading on the New York Mercantile Exchange, down 12 cents, at 1:21 p.m. London time. The contract climbed 0.9 percent to $96.42 on Sept. 7, the highest close since Aug. 31. Prices are 2.6 percent lower this year.

Brent for October settlement on the London-based ICE Futures Europe exchange was at $114.61 a barrel, up 36 cents. The European benchmark was at a premium of $18.35 to New York-traded West Texas Intermediate crude, up from $17.83 on Sept. 7.

Saudi Arabia’s Naimi said the kingdom was monitoring prices and is always “taking necessary steps to make sure supply is in line with demand and will meet the needs of its customers”.

Saudi Minister

Naimi said Saudi Arabia will continue, in cooperation with fellow Gulf Cooperation Council and OPEC member states, to “preserve the stability of the international oil market,” the agency reported today.

Oil in New York has technical support along the middle Bollinger Band on the daily chart, around $94.08 a barrel today, according to data compiled by Bloomberg. Futures rebounded from this indicator in July and August. Buy orders tend to be clustered near chart-support levels.

China reduced net crude imports last month to the lowest level in almost two years, customs data show. The nation bought 18.2 million metric tons of crude in August, or about 4.3 million barrels a day, according to data from the General Administration of Customs. That’s down 13 percent from a year earlier and the lowest rate since October 2010.

Fire Power

Measures to support and stabilize foreign trade will be announced soon, according to an interview with Commerce Minister Chen Deming broadcast yesterday by China Central Television. China’s economic expansion faces “notable downward pressure,” President Hu Jintao said Sept. 8.

“The economy is weak,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “The stimulus plans are designed to placate the market rather than improve the economies. You are putting in fire-power just to stop things falling.”

Money managers raised net-long positions in New York crude by 1,153, or 0.6 percent, to 193,624 futures and options combined in the seven days ended Sept. 4, according to a U.S. Commodity Futures Trading Commission report on Sept. 7.

In London, hedge funds and other money managers raised bullish bets on Brent crude to their highest in four months in the week ended Sept. 4, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 110,475 lots, the London-based exchange said today in its weekly Commitment of Traders report. That’s an increase of 2,590 contracts from 107,885 on Aug. 28 and the highest since May 1, the data show.

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