BLBG:Oil Rises to 12-Week High as Demand Signs, Supplies Trigger Bull Market
Oil rose a third day, trading at the highest in 12 weeks, on signs of improving U.S. demand and speculation Europe’s leaders will agree on a fund to contain the crisis threatening the region’s economic growth.
Futures climbed as much as 0.9 percent after surging 4.4 percent yesterday, entering a so-called bull market. Oil inventories at Cushing, Oklahoma, the delivery point for West Texas Intermediate, fell last week, according to a satellite survey. A report today may show U.S. consumer confidence rose a second month, while European leaders are scheduled to meet tomorrow to decide on a blueprint to tame the region’s debt problems. Mexican crude output may be curbed by Hurricane Rina.
“Risk appetite for commodities has sharply improved,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note. “Trade was heavy for U.S. crude, flipping the curve structure into backwardation for the first time since 2008, as market participants took direction from positive developments in Europe and the U.S. and priced-in for tighter supplies.”
Crude for December delivery gained as much as 80 cents to $92.07 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.92 at 12:06 p.m. Singapore time. The contract yesterday increased $3.87 to $91.27, the highest close since Aug. 3. Futures have risen 21 percent since Oct. 4. A gain of 20 percent meets the common definition of a bull market.
December futures were at an 18-cent premium to January. The front-month contract yesterday settled higher than the next month for the first time since Nov. 20, 2008. This so-called backwardation typically signals an increase in near-term demand.
Bullish Bets
Brent oil for December delivery was at $111.40 a barrel, down 5 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $19.51 to New York crude, compared with a close of $20.18 yesterday, the smallest difference since July 28. The spread was at a record settlement of $27.88 on Oct. 14.
Hedge funds and other money managers increased bullish bets on Brent by 32 percent in the week ended Oct. 18, according to data from ICE Futures Europe. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 54,208 contracts, the exchange said yesterday in its weekly Commitment of Traders report. Net-long positions rose by 13,204 contracts, from 41,004 a week earlier.
Hurricane Rina grew into a Category 1 storm today and is expected to become stronger as it moves toward resorts on Mexico’s Yucatan Peninsula, the U.S. National Hurricane Center said in an advisory at about 11 p.m. New York time. Kinetic Analysis Corp. estimated that the storm may shut in 6.69 million barrels of oil produced by Petroleos Mexicanos, Latin America’s largest oil producer.
U.S. Stockpiles
Oil stockpiles at Cushing dropped 760,000 barrels to 28.1 million, satellite images taken by Longmont, Colorado-based DigitalGlobe Inc. showed. Total U.S. inventories probably climbed 1.75 million barrels last week, according to the median of nine analyst estimates in a Bloomberg News survey before an Energy Department report tomorrow. Supplies in the prior week fell to the lowest since February 2010.
Crude futures declined the past two months as investors speculated that a slowing U.S. economy and Europe’s debt crisis will curb economic growth and demand for commodities. Prices have rebounded 23 percent since Oct. 4 on bets the global economy will recover.
The Conference Board’s consumer confidence index rose in October to 46 percent, from 45.4 percent, according to a Bloomberg News survey before data from the New York-based group.
European leaders return to Brussels tomorrow for their second summit in four days as they seek to agree on a plan to resolve the debt crisis. The European Union accounted for 16 percent of the world’s oil consumption last year, according to BP Plc’s annual Statistical review of World Energy.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
