Oil Near 1-Week Low as Supply Counters Europe Optimism

Oil traded near its lowest level in almost a week in New York as a forecast that U.S. crude supplies increased balanced optimism that a new agreement on aid for Greece will help resolve Europe’s debt turmoil.

Futures were little changed, paring an earlier advance of as much as 0.6 percent. U.S. crude inventories probably rose 500,000 barrels last week, a Bloomberg News survey of analysts before an Energy Department report tomorrow showed. European Union ministers agreed to help Greece manage its debt burden in talks in Brussels that lasted 13 hours, an EU official said early today. The OECD cut growth forecasts and warned of the risk of a “major” global recession.

“The positive outcome on Greece has already been priced in,” said Andrey Kryuchenkov, an analyst at VTB Capital in London who predicts Brent crude may slide to $110 a barrel this month. “Now attention is turning to fundamentals and they are far from ideal.”

Crude for January delivery was at $87.96 a barrel in electronic trading on the New York Mercantile Exchange at 1:39 p.m. London time, having gained as much as 51 cents to $88.25 a barrel. The contract decreased 54 cents yesterday to $87.74, the lowest since Nov. 21. Prices are down 11 percent this year.

Brent for January settlement slipped 8 cents to $111.84 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.86 to West Texas Intermediate, compared with $23.18 yesterday.

Greece Life Line

International Monetary Fund Managing Director Christine Lagarde said after the Brussels meeting that her aim to get Greece’s debt on a “sustainable path” was achieved in the discussions. IMF criticism of Europe’s failure to do so had held up an accord.

“Another life line for Greece is supportive for oil, as it shows we are slowly working our way through the euro crisis,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong. “Improvements in the euro crisis should be positive for the euro and thus could also add some weaker-dollar support to oil prices.”

The EU accounted for 16 percent of the world’s oil consumption last year, according to BP Plc’s Statistical Review of World Energy. The U.S. and China were the world’s biggest crude users, accounting for a combined 32 percent.

Contraction Risk

The Paris-based Organization for Economic Cooperation and Development predicted that the euro area will shrink 0.4 percent this year and 0.1 percent next year, compared with a 0.1 percent 2012 contraction and 0.9 percent 2013 growth expected in May.

“After five years of crisis, the global economy is weakening again,” OECD Chief Economist Pier Carlo Padoan said today in the organization’s semi-annual Economic Outlook. “The risk of a major contraction cannot be ruled out.”

U.S. gasoline supplies probably rose 1 million barrels, according to the median of five analyst estimates in the Bloomberg survey before the Energy Department report. Distillates, a category that includes heating oil and diesel, rose 500,000 barrels, the survey shows. The American Petroleum Institute will release separate inventory data today.

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, is unlikely to adjust output levels at its next meeting on Dec. 12 because the market is adequately supplied, Angola’s national representative to the producer group said.

“If prices will be as they are at the moment, around $110 a barrel, something like that, I think the situation will keep unchanged,” Luis Neves said today in an interview in Cape Town. “The idea is to achieve prices that are fair not only for us, OPEC, as exporters but also” the buyers, he said.

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