Oil gains as much as 0.5 percent after a report shows US service industries expanded in November at the fastest pace in six months
Oil traded near the highest in 26 months as signs the economic recovery is
gathering pace in the US, the world’s biggest crude-consuming nation, stoked
speculation that fuel demand will increase.
Oil rose as much as 0.5 percent after a report showed US service industries
expanded in November at the fastest pace in six months. Futures pared gains
after the dollar rebounded on Federal Reserve chairman Ben S Bernanke's remarks that a return to a recession “doesn’t seem likely.” A
stronger US currency reduces the appeal of investing in commodities.
“Ninety dollars a barrel is now like a magnet that the bulls in the market
want to break through,” said Victor Shum, a senior principal at energy consultants Purvin & Gertz Inc in
Singapore. “These days, sentiment is so bullish that any bad news on the
economic front can’t hurt the rally in oil.”
Crude for January delivery was at $89.35 a barrel, up 16 cents, in electronic
trading on the New York Mercantile Exchange at 1:24 p.m. Singapore time. It
earlier rose as much as 41 cents to $89.60, the highest intraday price since
Oct 9, 2008. Oil has climbed 12.6 percent this year.
Oil will advance to $120 a barrel before the end of 2012 as consumption grows
in emerging economies, according to a Dec 3 report from JPMorgan Chase &
Co. Futures will average $93 a barrel next year, up from a previous estimate of
$89.75, the bank’s analysts forecast.
Crude settled on Dec 3 at the highest closing price since Oct 7, 2008,
after the Dollar Index dropped as US employers added fewer jobs than forecast
in November. The Institute for Supply Management’s non-manufacturing index,
which covers about 90 percent of the economy, increased to 55 last month from
54.3 in October. A reading higher than 50 signals growth.
Top of range
“It’s meant to be a manufacturing-led recovery,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney.
“We’re right at the top end of the range” for crude prices, he said.
US unemployment may take five years to fall to a normal level and Fed
purchases of Treasury securities beyond the $600bn announced last month
are possible, Bernanke said, according to a transcript of an interview airing
today on CBS Corp.’s “60 Minutes” programme.
The Dollar Index had its sharpest monthly gain since May last month as
optimism the Fed’s stimulus plan will spur growth outweighed concern the
greenback would be debased. The index rose 0.1 percent to 79.486 today.
Brent crude for January settlement gained as much as 33 cents, or 0.4
percent, to $91.75 a barrel on the ICE Futures Europe exchange in London. The
contract climbed 73 cents, or 0.8 percent, to $91.42 a barrel on Dec 3.
Crude prices also rose after heating oil prices surged to the highest in more
than two years on Dec 3 amid unusually cold weather in Europe.
Heating oil for January delivery rose 0.2 percent to $2.4928 a gallon on the
New York Mercantile Exchange. It advanced 3.28 cents, or 1.3 percent, to settle
at $2.4874 a gallon on Dec 3, the highest settlement price for the front- month
contract since Oct 8, 2008.
“The cold weather in Europe has helped squeeze up distillates demand, and
that is supportive of stronger oil prices,” Purvin & Gertz’s Shum said.
The earliest widespread snowfall in the UK since 1993 has frozen over
roads, disrupting traffic, with icy weather likely to last until at least Dec
8, British Weather Services said last week.
Temperatures from the US Midwest to the Northeast will also be lower than
normal from Dec 8 through Dec 16, the US National Weather Service Climate
Prediction Centre said.
Hedge funds and other large investors increased bullish bets on oil by 18
percent in the seven days ended Nov 30, according to the Commodity Futures
Trading Commission’s weekly Commitments of Traders report. It was the largest
increase since the week ended Oct 5.