Oil Advances From Seven-Month Low as Drop May Be Overdone
Futures gained as much as 1.3 percent in New York. China, the world’s second-biggest oil consumer, will intensify “fine-tuning” of policies, according to the government’s second statement in four days signaling a commitment to growth as domestic demand slows. World powers and Iran are meeting for a second day in Baghdad to overcome disagreements over measures to ensure the Persian Gulf country’s nuclear program is peaceful.
“China has been discussing ways of boosting growth in the last couple of weeks, focusing on building infrastructure which is a positive for commodities, especially oil,” said Thina Margethe Saltvedt, an analyst at Nordea Bank AB (NDA) in Oslo. “Most eyes will be on Iran today as the meetings will give an idea about how far the parties are willing to go in negotiations.”
Crude for July delivery gained as much as $1.17 to $91.07 a barrel in electronic trading on the New York Mercantile Exchange and was at $90.60 at 1:12 p.m. London time. The contract yesterday slid 2.1 percent to $89.90, the lowest close since Oct. 21. Prices are 8.3 percent lower this year.
Brent oil for July settlement rose 41 cents, or 0.4 percent, to $105.97 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $15.37, compared with $15.66 yesterday.
China “must proactively take policies and measures to expand demand and to create a favorable policy environment for stable and relatively fast economic growth,” the government said on its website yesterday, summarizing a meeting of the State Council, or cabinet.
The statement builds on Premier Wen Jiabao’s comments published May 20 showing a bigger focus on bolstering growth. Authorities this month cut banks’ required reserves for the third time since November.
Chinese, French, German, Russian, British and U.S. negotiators, the so-called P5+1 group, reconvened with their Iranian counterparts for a second day today.
“Progress has been made,” Michael Mann, the spokesman for European Union foreign policy chief Catherine Ashton, told reporters in Baghdad today. Ashton met with Iran’s top nuclear negotiator, Saeed Jalili, to discuss where and when to hold the next round of talks, Mann said.
Iran and the six countries will hold their next round of negotiations in Geneva in three weeks, according to Iran’s state-run Mehr news agency, which didn’t say where it got the information.
The first day of talks recessed yesterday at almost midnight. While Iran denies it wants to make nuclear weapons, it has refused to cooperate with inspectors and is under multiple international sanctions.
The outcome of the discussions remains uncertain as long as proposals by the Islamic republic are rejected, Iran’s Press TV reported today. The West is showing “reluctance” over the proposals and its position isn’t clear, Iranian delegate Taleb Mahdi told reporters.
Iran produced an average of 3.3 million barrels a day of crude in April, according to estimates compiled by Bloomberg. Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, pumped 9.8 million a day.
Futures erased gains earlier as a decline in German business confidence and disagreement between European leaders on joint bond sales fanned concern that the region will fail to resolve its debt crisis.
The Munich-based Ifo institute said today its business climate index, based on a survey of 7,000 executives, dropped to 106.9 from 109.9 in April. That’s the steepest decline since August, when the region’s debt crisis spread to Italy and Spain, and below all 37 estimates in a Bloomberg News survey of economists. The median forecast was for a decrease to 109.4.
European leaders clashed over joint debt sales as they called on Greece to stick with the budget cuts needed to stay in the euro and offered no immediate relief for recession-wracked Spain. At the 18th summit in more than two years of crisis-fighting, new French President Francois Hollande challenged German-dominated deficit-cutting orthodoxy that has failed to stabilize the euro area and led to speculation that Greece might be forced out.
Oil dropped yesterday after an Energy Department report showed U.S. crude inventories rose 883,000 barrels last week to 382.5 million, the highest level since August 1990. Supplies at Cushing, Oklahoma, the delivery point for the New York futures contract, climbed 1.67 million barrels to a record 46.8 million.
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