Oil Snaps Three Days of Losses on China Growth Outlook

Oil rose, snapping three days of losses and trimming its weekly decline, amid speculation China’s industrial production rose at the fastest pace since March, boosting demand in the world’s second biggest crude user.

Futures advanced as much as 0.4 percent before a report Dec. 9 that may show China’s output grew 9.8 percent in November from a year earlier, according to the median estimate of economists surveyed by Bloomberg News. The country’s retail sales are forecast to have increased 14.6 percent last month, compared with a 14.5 percent gain in October. Oil slid to the the lowest price in three weeks yesterday after the European Central Bank cut its forecast for euro-area economic growth.

“We’ve got a two out of three global scenario,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “The U.S. and China are both going ahead, but Europe is going backwards. Recent data out of China show a stabilization of growth rates, and we’ll get more data over the weekend, which could introduce a note of caution in trading today.”

Crude for January delivery was at $86.54 a barrel, up 28 cents, in electronic trading on the New York Mercantile Exchange at 1:56 p.m. Singapore time. The contract slid $1.62 yesterday to $86.26, the lowest close since Nov. 15. Prices are down 2.7 percent this week and 12 percent this year.

Brent for January settlement rose 24 cents to $107.27 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $20.73 to West Texas Intermediate. It closed at $20.77 yesterday, the narrowest gap since Oct. 19.

China Demand

China’s 2013 oil demand will increase by 3.4 percent, or 321,000 barrels a day, from this year amid an improvement in the country’s economic growth, Deutsche Bank AG said.

China’s diesel consumption may rise as much as 3 percentage points next year after rising 1 percent so far in 2012 as industrial production expands, Soozhana Choi, the bank’s Singapore-based chief oil strategist, said in a report dated today. The country will account for 40 percent of global demand growth in 2013, according to the note.

Oil is rebounding in New York after closing yesterday above technical support along an upward-sloping trend line, according to data compiled by Bloomberg. This line, connecting the lows of June and November, is around $85.50 a barrel today. Buy orders tend to be clustered near chart-support levels.

Price Outlook

Prices may decline next week on concern that weaker economic growth will reduce fuel demand and boost inventories, a Bloomberg survey showed. Thirteen of 29 analysts and traders, or 45 percent, forecast crude will decrease through Dec. 14. Nine respondents, or 31 percent, predicted a gain. Seven forecast little change. Last week, 33 percent projected an increase.

The euro area won’t start to shake off its slump until the second half of 2013, ECB President Mario Draghi said at a press conference yesterday in Frankfurt after policy makers left the benchmark rate at a record low of 0.75 percent. The European Union accounted for 16 percent of the world’s oil consumption last year, and the U.S. consumed 21 percent, according to BP Plc’s Statistical Review of World Energy.

(Corrects China diesel consumption growth figure in seventh paragraph.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE