BS: Crude Oil Rises as 5-Day Decline Makes Commodity Cheap to Buy
By Ben Sharples and Christian Schmollinger
July 5 (Bloomberg) -- Crude oil rose for the first time in six days in New York as investors bet its biggest weekly drop since May 7 made the commodity cheap given the outlook for global growth.
Oil climbed as much as 0.8 percent, snapping five days of consecutive declines, after China’s Premier Wen Jiabao said over the weekend the government will ensure “steady and relatively fast” growth. Crude’s 14-day relative strength index dropped below 40 last week for the first time since May 26, approaching a level that would typically indicate a rebound is imminent.
“The outlook for growth around the world is certainly not as optimistic as it was a few months ago,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. “There will be the longer-term participants in the market who are viewing this decline in price as a good time to get long.”
Crude oil for August delivery gained as much as 56 cents to $72.70 a barrel in electronic trading on the New York Mercantile Exchange. It was at $72.68 a barrel at 2:58 p.m. Singapore time. The contract fell 81 cents, or 1.1 percent, to $72.14 on July 2. Prices have declined 8.6 percent since the start of the year.
Crude dropped 8.5 percent in the week through July 2 after reports of slowing economic expansion in the U.S. and China, the world’s two largest energy consumers.
There will be no floor trading on the Nymex today because of the U.S. Independence Day holiday.
Slowing Manufacturing
Both the U.S. and China reported last week that manufacturing was expanding at a slower-than-expected rate. Crude oil demand growth follows increases in economic expansion as fuel consumption increases.
China’s Wen yesterday addressed the country’s economy in a statement made after visiting businesses in southern Hunan province. The nation will maintain policy continuity and flexibility to ensure “steady and relatively fast” growth and to balance growth, management of inflation expectations and economic restructuring, he said.
Asia equities were higher for the first time in five days. The MSCI Asia Pacific Index gained 0.2 percent to 111.88 as of 2:42 p.m. in Tokyo.
Brent crude oil for August settlement rose as much as 63 cents, or 0.9 percent, to $72.28 a barrel on the ICE Futures Europe exchange in London. It was at $72.13 at 3 p.m. Singapore time. The contract fell 69 cents, or 1 percent, to $71.65 on July 2.
Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended June 29, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 37,120 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 2,515 contracts, or 6 percent, from a week earlier.
--Editors: Jane Lee, Clyde Russell.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net
To contact the editor responsible for this story: Clyde Russell in Singapore at crussell7@bloomberg.net.
