Oil traded near the highest level in a week in New York after the Federal Reserve announced new measures to bolster the U.S. economy and the International Energy Agency increased its demand forecast.
Futures were little changed after climbing the most in two weeks yesterday. The Fed plans to buy $45 billion a month in Treasury securities to boost economic growth in the world’s biggest crude user. The IEA raised oil-consumption estimates for the fourth quarter and 2013 on signs of a rebound in China. OPEC kept its production target unchanged for a second time this year as members judged prices to be sufficiently high.
“The Fed news is supportive for commodity prices” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It creates a bit of a base for commodities and it means that the pullback in prices from these levels will be fairly shallow. Most people have de-risked their China outlook in the past couple of months.”
Crude for January delivery was at $86.39 a barrel, down 38 cents, in electronic trading on the New York Mercantile Exchange at 2:33 p.m. Sydney time. The contract increased 98 cents to $86.77 yesterday, the highest close since Dec. 5. Prices are down 12 percent this year.
Brent for January settlement fell 45 cents to $109.05 a barrel on the London-based ICE Futures Europe exchange. The contract gained 1.4 percent yesterday, the most since Nov. 19.
The European benchmark future was at a premium of $22.57 to West Texas Intermediate, from $22.73 yesterday, the highest since Nov. 28.
The spread increased after the U.S. Energy Department yesterday reported a surge in stockpiles at Cushing, Oklahoma, the delivery point for the WTI contract. Supplies for the week ending Dec. 7 climbed 1.2 million barrels to 46.8 million, the highest since June 29.
WTI prices gained yesterday as the dollar declined after the Fed vowed to keep interest rates low at least as long as the unemployment rate remains above 6.5 percent and if inflation between one and two years ahead is projected to be no more than 2.5 percent. This was the first time it has linked the outlook for its main rate to unemployment and inflation.
The U.S. currency yesterday slipped 0.5 percent against its European counterpart. A falling dollar and rising euro increase dollar-denominated oil’s value as an investment alternative.
The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil, maintained its official quota at 30 million barrels a day, a level it now exceeds by about 1 million barrels a day. It failed to elect a new secretary-general at a meeting yesterday in Vienna and agreed to extend the term of Abdalla El-Badri for one more year.
Oil in New York has technical support along an upward-sloping trend line on the daily chart, around $85.80 a barrel today, according to data compiled by Bloomberg. Futures yesterday rebounded from this line, which connects the intraday lows of June and November. Buy orders tend to be clustered near chart-support levels.
Global oil consumption in the final three months of 2012 will average 90.5 million barrels a day, about 435,000 barrels, or 0.5 percent, more than previously forecast, the Paris-based IEA said in a monthly report yesterday. Demand will expand by 865,000 barrels a day in 2013 to 90.5 million, the IEA said, adding 110,000 barrels to its previous forecast.
China will consume 9.9 million barrels a day in the fourth quarter, 115,000 barrels more than projected in last month’s report, according to the IEA. Consumption is estimated to average 9.8 million barrels a day in 2013.
U.S. crude stockpiles gained 843,000 barrels last week, the Energy Department showed yesterday. They were forecast to drop 2.5 million barrels, according to the median estimate of 11 analysts in a Bloomberg News survey.
Stockpiles of gasoline grew 5 million barrels to 217.1 million, the most since April 6. They were forecast to increase 2 million barrels, according to the survey. Distillate fuel supplies, including diesel and heating oil, climbed for a second week by 2.9 million barrels to 118.1 million. They were expected to increase 1.1 million barrels, the survey reported.