BLBG: Oil Rises as Rate-Cut Forecasts Outweigh Unemployment Increase
By Mark Shenk
Nov. 7 (Bloomberg) -- Crude oil rose as speculation that the Federal Reserve will lower interest rates outweighed a report of the highest U.S. unemployment rate in more than a decade.
Oil prices tumbled 14 percent the past two days as stock markets declined on signs that the U.S. recession will spread. Futures on the Chicago Board of Trade showed an 95 percent chance the Fed will cut its 1 percent target rate for overnight lending between banks by a half-percentage point at its Dec. 16 meeting to spur growth in the world’s biggest energy consuming country.
“The oil market appears to be shrugging off the unemployment number,” said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. “The slide of the last two days may have priced in the negative news. We’ve been testing the lower end of the range recently but have been unable to break decisively through the $60 level.”
Crude oil for December delivery rose 77 cents, or 1.3 percent, to $61.54 a barrel at 12:04 p.m. on the New York Mercantile Exchange. Futures touched $59.97, the lowest since March 22, 2007. Prices, which have tumbled 58 percent since reaching a record $147.27 on July 11, are down 36 percent from a year ago.
“Prices are still looking for a floor,” said Steve Maloney, a risk-management consultant for Stamford, Connecticut-based Towers Perrin. “There won’t be a sustained price increase until inventories begin to move to the low side of normal and there are indications that economic growth, led by the U.S., is picking up.”
OPEC Meeting
The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s crude, is due to meet on Dec. 17 to discuss production. Most of its 13 members have announced that they will implement an Oct. 24 resolution to slash output by 1.5 million barrels a day.
Daily shipments from OPEC to consumers in the U.S. and Europe will decline to their lowest in two years in the four weeks ending Nov. 22, following the group’s decision to cut output, industry consultant Oil Movements said yesterday.
“The OPEC cuts are starting to hit export numbers, which may give the market some support,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “It’s always a guessing game, but they are saying the right things about making the promised cuts.”
Brent crude oil for December settlement increased 67 cents, or 1.2 percent, to $58.10 a barrel on London’s ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
