BLBG:Crude Oil Rises to One-Month High as Bank of America Results Boost Stocks
Crude oil rose to the highest level in more than one month as U.S. stocks rallied after Bank of America Corp. (BAC) reported better-than-estimated results, raising hopes that economic growth will stabilize.
Oil climbed 2.3 percent as the Standard & Poor’s 500 Index rose after Bank of America, this year’s worst performer in the Dow Jones Industrial Average, reported a third-quarter profit versus a loss a year earlier. Crude fell as much as 1 percent earlier as data showed China’s economy grew at the slowest pace in two years.
“The correlation between oil and equities has risen considerably since the first half of the year,” said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “You’re seeing traders conduct a risk-on, risk-off strategy. When there is good news, there’s an appetite for risk and you see oil and stocks gain.”
Crude for November delivery rose $1.96 to $88.34 a barrel on the New York Mercantile Exchange, the highest settlement price since Sept. 15.
Brent oil for December settlement rose 99 cents, or 0.9 percent, to $111.15 a barrel on the London-based ICE Futures Europe exchange. The spread between the December Brent and Nymex crude contracts narrowed to $22.62 from a record high of $27.88 on Oct. 14.
Prices were little changed from the settlement as the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles fell 3.13 million barrels to 337.3 million. December oil was up $1.86, or 2.2 percent, to $88.24 a barrel in electronic trading at 4:33 p.m.
Libya Output
Nymex oil and Brent “are coming closer as Libya comes back online,” said Richard Ilczyszyn, a Chicago-based senior market strategist at MF Global. Libya’s largest oil refinery at Ras Lanuf will be ready to start operations next month, Libyan Emirates Refining Co. said yesterday.
The plant, which can process 220,000 barrels a day of crude, was shut in March because of fighting between forces loyal to Muammar Qaddafi and rebels seeking the former leader’s ouster.
The country’s output fell to 45,000 barrels a day in August, according to Bloomberg estimates. The North African nation pumped 100,000 barrels a day last month.
The Standard & Poor’s 500 index gained 2 percent to 1,225.38 after dropping as much as 0.8 percent. The Dow Jones Industrial Average rose 1.6 percent to 11,577.05. The Standard & Poor’s GSCI Index of 24 raw materials increased 0.7 percent to 637.22.
Bank of America
Bank of America swung to a third-quarter profit on higher revenue, better credit quality and one-time gains. Shares jumped as much as 7.6 percent in New York trading.
“We continue to track the equity market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The question is how the U.S. economy is going to play out in the next few months.”
Homebuilders in the U.S. were less pessimistic than forecast in October as near record-low borrowing costs and price decreases raised hopes the market will improve.
The National Association of Home Builders/Wells Fargo sentiment index climbed to 18, the highest level since May 2010, from 14 in the prior month, data from the Washington-based group showed today.
Economists surveyed by Bloomberg News projected the measure would rise to 15, according to the median forecast. Readings below 50 mean more respondents said conditions were poor.
Chinese Growth
China’s gross domestic product grew 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009, the country’s statistics bureau said today.
The growth rate was less than the median estimate of 9.3 percent in a Bloomberg News survey of 22 economists and followed a 9.5 percent increase in the previous three months. The country is the biggest oil consumer after the U.S.
Apparent oil demand in China, or the amount of processing volume plus net imports, increased 2.8 percent to 8.949 million barrels a day in September compared with a year earlier. That’s down from 7.97 percent year-on-year growth in August, based on Bloomberg data.
“All oil traders have their eyes glued to China but we are also earnings-focused,” said Ilczyszyn.
An Energy Department report tomorrow may show U.S. crude inventories climbed for a second week, according to a Bloomberg News survey.
Stockpiles of crude oil increased by 2 million barrels, or 0.6 percent, to 339.6 million in the seven days ended Oct. 14, according to the median of 13 analyst estimates in the Bloomberg survey before a weekly Energy Department report tomorrow.
Gasoline supplies dropped 1.5 million barrels to 208.1 million last week, the survey showed.
Oil volume in electronic trading on the Nymex was 614,320 contracts as of 4:33 p.m. in New York. Volume totaled 535,799 contracts yesterday, 20 percent below the three-month average. Open interest was 1.43 million contracts.
To contact the reporters on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
