BLBG: Oil Rises as U.S., European Governments Move to Support Banks
By Alexander Kwiatkowski and Grant Smith
Oct. 13 (Bloomberg) -- Oil rose, rebounding from last week's 17 percent plunge, as governments in the U.S. and Europe acted to stem the worst financial crisis since the 1930s.
Crude followed stock markets higher after the U.K. provided $64 billion of capital to its banks and the Federal Reserve said it will lend unlimited dollar funds to financial institutions. The International Agency last week said global oil demand this year will grow at the lowest pace since 1993 as economies slide into a recession.
``We are running higher very much on the coat tails of the equity markets,'' said Robert Laughlin, senior broker at MF Global Ltd. in London. ``I'm not convinced that what came out of the U.S. and Europe is going to be enough.''
Crude oil for November delivery rose as much as $4.10, or 5.3 percent, to $81.80 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $81.17 at 12:13 p.m. in London.
Oil has fallen 45 percent since reaching a record $147.27 in July on concern that a global recession will cut demand for fuel. The contract fell 10 percent to $77.70 a barrel on Oct. 10, the lowest settlement since Sept. 10, 2007.
The MSCI World Index of global equities added 2.2 percent to 930.5 at 12:01 p.m. in London. The index tumbled 20 percent last week.
Goldman Sachs Group Inc. lowered its crude oil price forecasts for a second time this year. It reduced its estimate for the U.S. benchmark West Texas Intermediate crude for the fourth quarter to $75 a barrel from $110, and cut its year-end target to $70 a barrel from $115, research analysts led by Jeffrey Currie and Giovanni Serio said in a report today.
`Underestimated Depth'
``We clearly underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand,'' the analysts wrote.
New York oil futures dropped 17 percent last week, the biggest one-week decline since the U.S.-led invasion of Iraq in March 2003. Copper, nickel and aluminum also dropped as world equity markets plunged and the International Monetary Fund warned the world was on the cusp of recession.
Brent crude oil for November settlement rose as much as $3.98, or 5.4 percent, to $78.07 a barrel on London's ICE Futures Europe Exchange, and traded at $77.41 at 12:14 p.m. London time. It dropped 18 percent last week.
``The oil market was oversold before,'' said Eugen Weinberg, a commodity analyst at Commerzbank AG in Frankfurt. ``It should help energy markets the more confident the equity markets become.''
The euro jumped the most in three weeks against the dollar today on the region's bank rescue plan. A weaker dollar typically supports oil prices because it makes commodities cheaper for buyers in other currencies.
To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net
