Oil Heads for First Monthly Gain Since August on Economy

Oil headed for its first monthly gain since August in New York amid signs of economic growth in the U.S. and China, the world’s biggest crude consumers.

West Texas Intermediate futures were little changed after climbing 1.8 percent yesterday, the most since Nov. 19. Prices will probably be stable next week amid talks in Washington aimed at avoiding more than $600 billion in spending cuts and tax increases known as the fiscal cliff that are due to kick in next year, according to a Bloomberg survey. The U.S. economy expanded more than previously estimated last quarter, the Commerce Department said in Washington.

“What could initiate a rally is a resolution to the fiscal cliff,” said Torbjoern Kjus, a senior oil analyst at DNB ASA in Oslo. “There will be a compromise reached and that could unleash a rally. I expect there’ll be a strong start to the year in the oil market.”

Crude for January delivery was at $87.85 a barrel, down 22 5 cents, in electronic trading on the New York Mercantile Exchange at 1:21 p.m. London time. The contract gained $1.58 yesterday to $88.07. Prices are up 1.8 percent this month. WTI has lost 11 percent this year, the worst annual performance since 2008.

Brent for January settlement was 12 cents lower at $110.64 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.80 to WTI, from $22.69 yesterday.

Economic Growth

WTI crude in New York rose yesterday after the revised figures from the Commerce Department showed U.S. gross domestic product grew at a 2.7 percent annual rate last quarter, up from a 2 percent prior estimate.

The proportion of respondents in a Bloomberg quarterly survey who see the Chinese economy improving or remaining stable surged to 72 percent from September’s 38 percent, according to the poll of investors, analysts and traders who are Bloomberg subscribers. Government data this month from retail sales to industrial production have shown China’s growth picking up after a seven-quarter slowdown.

Japan, the world’s third-biggest crude consumer, approved a second round of fiscal stimulus worth 880 billion yen ($10.7 billion) using budget reserves as Prime Minister Yoshihiko Noda attempts to boost the economy before elections on Dec. 16. Combined with a first round announced last month, the latest measures will increase Japan’s gross domestic product by about 0.4 percentage point, the Cabinet Office said in Tokyo today.

Middle East Tension

Oil surged earlier this month amid eight days of fighting between Israel and Hamas, which controls the Gaza Strip, before the two sides signed a Nov. 21 cease-fire agreement. Protests erupted in Egypt after President Mohamed Mursi issued a Nov. 22 decree that prevents his actions from being challenged by the courts.

The Middle East and North Africa accounted for about 40 percent of the world’s petroleum output last year, according to BP Plc’s Statistical Review of World Energy.

Crude’s gains may falter after WTI failed to trade higher than the 50-day moving average, a sign of technical resistance, according to data compiled by Bloomberg. This indicator, at about $88.61 today, is where sell orders may be clustered.

Seven of 15 analysts and traders surveyed by Bloomberg said prices would be little changed next week. Five respondents estimated futures will rise and three projected a decline, the survey showed.

OPEC will keep its 30 million barrel-a-day group quota unchanged at its Dec. 12 meeting in Vienna, according to all 14 analysts in a separate survey conducted by Bloomberg today and yesterday.

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