Oil Trades Near Four-Month High Before Federal Reserve StatementGrant Smith
Oil traded near the highest level in more than four months before a Federal Reserve policy statement that may signal the U.S. central bank will take additional steps to stimulate the economy of the world’s biggest crude user.
West Texas Intermediate rose as much as 0.7 percent to the highest since Sept. 17, and pared gains after the U.S. economy contracted in the fourth quarter. Crude is poised for a third monthly gain, the longest run since April 2011. The Federal Open Market Committee will renew its commitment to purchasing assets during a two-day meeting, according to a Bloomberg News survey. Economic confidence in the euro area rose more than economists forecast in January.
“We would expect a status-quo announcement from the Fed with an acknowledgement that the outlook has improved slightly,” said Guy Wolf, a strategist at London-based commodities broker Marex Spectron Group Ltd., who predicts European benchmark Brent crude will trade from $100 a barrel to $125 in the next month. “The U.S. economy is clearly strong, but the employment numbers are not so good that a Fed exit is imminent.”
WTI for March rose as high as $98.24, and was 14 cents higher at $97.71 in electronic trading on the New York Mercantile Exchange at 1:52 p.m. London time. The volume of all futures traded was 35 percent above the 100-day average. Oil has gained 6 percent this month.
Brent for March settlement rose above $115 a barrel for the first time since Oct. 16, advancing as much as 88 cents, or 0.8 percent to $115.24 on the London-based ICE Futures Europe exchange. The volume of all futures traded was 22 percent above the 100-day average. The European benchmark grade was at a premium of $16.94 to WTI futures, from $16.79 yesterday.
U.S. gross domestic product dropped at a 0.1 percent annual rate, weaker than any economist forecast in a Bloomberg survey and the worst performance since the second quarter of 2009, Commerce Department figures showed.
The FOMC will renew its policy of purchasing assets after determining that the benefits from the program exceed any risk of inflation or financial instability, according to the survey of economists last week.
An index of European executive and consumer sentiment rose to 89.2 from a revised 87.8 in December, the European Commission in Brussels said today. That’s the highest since June. Economists had forecast an increase to 88.2, according to the median of 30 estimates in a Bloomberg News survey.
U.S. crude stockpiles rose for a fourth week by 4.2 million barrels to 368.2 million last week, the highest level in more than a month, the industry-funded API said yesterday. The Energy Information Administration report today may show supplies increased by 2.5 million barrels, according to the median estimate of nine analysts surveyed by Bloomberg. The EIA reports oil-supply figures today.
Inventories of gasoline probably advanced by 1 million barrels, while distillates, which include diesel and heating oil, dropped 500,000 barrels, according to the survey.
China, the world’s second-largest oil consumer, will increase its crude imports this year by 7.3 percent, the biggest gain since 2010, according to the median estimate of five analysts in a survey. Net imports were a record 5.4 million barrels a day in 2012, customs data show. Shipments climbed 6.9 percent last year and 6.3 percent in 2011.
The nation, which imports about half its crude, will boost oil consumption by 4 percent to 9.98 million barrels a day this year, the International Energy Agency forecast in its Monthly Oil Market report on Jan. 18. U.S. demand will stay unchanged at 18.7 million barrels a day, the IEA said.
Oil may extend its rally in New York after a “golden cross” formed. The 50-day moving average, at $90.70 a barrel today, climbed above the 100-day mean and pared its discount to the 200-day indicator to 30 cents, the smallest gap since June, according to data compiled by Bloomberg. Investors typically buy when a moving average rises over a longer-term one. Crude’s 14-day relative strength index is higher than 70 for a second day, signaling the advance may stall.