BLBG: Crude Oil Rises to Two-Week High on European Equities, OPEC Cut
Crude oil rose to its highest in more than two weeks, gaining with European equity markets as banks moved to stem credit-related losses.
The Organization of Petroleum Exporting Countries will cut supply by 5 percent this month, according to consultant PetroLogistics Ltd., to fulfill output constraints announced in December. Gold advanced to a three-month high in London, while copper gained for a second day.
“We are seeing a little bit of risk appetite return,” said Mike Wittner, head of oil research at Societe Generale SA in London. “We ultimately expect prices to strengthen in the second quarter, as OPEC cuts start to trim global inventories and tighten up the balances.”
Crude oil for March delivery rose as much as 58 cents, or 1.3 percent, to $47.05 a barrel on the New York Mercantile Exchange. That’s the highest price for the front-month contract since Jan. 7. It traded for $46.89 at 11:31 a.m. London time.
The contract rose 6.4 percent to $46.47 on Jan. 23, the highest settlement since Jan. 6. It gained 9.2 percent last week as oil producers reduced output and plunging equity markets prompted investors to buy oil, gold and other commodities.
Brent crude oil for March settlement traded at $48.66 a barrel, 29 cents higher on London’s ICE Futures Europe exchange at 11:33 a.m. local time. The contract gained 6.6 percent to $48.37 a barrel on Jan. 23.
The Dow Jones Stoxx 600 Index added 1 percent to 184.32 at 10:34 a.m. in London. Gold for immediate delivery rose $6.05, or 0.7 percent, to $905.80 an ounce by 10:24 a.m. in London.
Falling Demand
New York oil futures have fallen 69 percent from the July record $147.27 a barrel as the world economy stalled, prompting the Organization of Petroleum Exporting Countries and the International Energy Agency to predict falling demand this year.
Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended Jan. 20, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 46,134 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 7,160 contracts, or 13 percent, from a week earlier.
“The market remains unconvinced that OPEC’s supply-side restraint will be sufficient,” said Gordon Gray, an analyst at Collins Stewart in London. “This perception will probably only be altered if we start to see hard evidence of physical market tightening.”
Inventory Reversal
Crude-oil supplies in the U.S. rose four times more than forecast to the highest since August 2007 as refineries cut operating rates, the Energy Department said Jan. 22, when it reported the fourth straight weekly gain in stockpiles.
“By March we could start to see signs of a reversal of the recent trend of big U.S. inventory builds,” Gray said. “This could create the conditions for a modest recovery in prices.”
OPEC pumps about 40 percent of the world’s oil and agreed last month to cut output by 9 percent starting Jan. 1 to prevent a glut and stem falling prices.
The 11 member-states covered by the agreement will reduce January output by about 5 percent, consultant PetroLogistics Ltd. said Jan. 23 based on tanker movements.
