BLBG: Oil Swings Between Gains, Losses as IEA Cuts Demand Forecast, Euro Climbs
Oil fluctuated in New York after the International Energy Agency cut its 2012 global demand forecast and the euro rose after the European Union released plans to recapitalize banks and halt the debt crisis.
Futures swung between gains and losses after the Paris- based IEA reduced estimates for world oil consumption by 210,000 barrels a day and said Libya would pump about 600,000 barrels a day by the end of 2011. The euro rose to a three-week high and equities and commodities advanced on speculation that Europe’s debt problems will be resolved.
“The IEA lowered their demand expectations and said Libyan output is going to be better than expected,” said Matt Smith, a commodities analyst with Summit Energy Services Inc. in Louisville, Kentucky. “Crude is latching onto the stronger euro and the optimism that we’re going to see the European debt crisis contained.”
Oil for November delivery fell 19 cents to $85.62 a barrel at 12:20 a.m. on the New York Mercantile Exchange. Prices have risen 13 percent since Oct. 4. Futures have fallen 6.3 percent in 2011.
Brent oil for November settlement rose 82 cents, or 0.7 percent, to $111.55 on the London-based ICE Futures Europe exchange. Brent was $25.93 a barrel more expensive that New York futures, near a record $26.87 based on settlement prices Sept. 6.
The IEA reduced its world demand forecast to 90.5 million barrels a day. That means consumption will increase by 1.3 million barrels a day, or 1.4 percent, from this year. Oil inventories in industrialized nations fell below their five-year average for the first time in more than three years, according to the IEA.
IEA Forecast
The IEA report also said recent market data doesn’t signal a “downward consumption spiral.”
“There’s still robust growth but it’s being affected by this economic slowdown,” David Fyfe, head of the IEA’s industry and markets division, said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse.” The IEA doesn’t “think the balance of probabilities has tipped toward that much weaker picture of economic growth for next year.”
European Commission President Jose Barroso today called for a “coordinated approach” to recapitalize the region’s banks, including requiring lenders temporarily to meet “significantly higher” capital requirements. He also endorsed the payout of a sixth loan to Greece and a faster start for a permanent rescue fund for Europe’s debt problems.
The euro gained 1.3 percent to $1.3814 in New York. Earlier, it touched $1.3817, the highest intraday level since Sept. 16.
EU Risk
Slovakia’s political parties reached an agreement today to approve Europe’s enhanced bailout fund, paving a way for a repeated vote in the coming days and early elections next year. Lawmakers rejected the measure yesterday amid a dispute over the future of Prime Minister Iveta Radicova.
Slovakia is the only country in the 17-member euro area yet to approve the European Financial Stability Facility.
“There’s relief about the risk in the EU,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark, who forecasts Brent will average $107 a barrel this quarter. “On a longer horizon, inflation expectations and recovered growth after the sovereign debt problems have been solved will support oil prices.”
Oil prices were also supported by rallies equities and other commodities. The Standard & Poor’s 500 Index gained 1.3 percent to 1,211.35, and the Dow Jones Industrial Average increased 1 percent to 11,534.29.
The Standard & Poor’s GSCI Index of 24 commodities was little changed at 624.35. It has risen 8.4 percent in the past six sessions.
U.S. Forecast
The U.S. Energy Department cut its crude-oil price projection for 2011 after futures prices in New York tumbled in September by the most since May 2010.
West Texas Intermediate oil will average $92.36 a barrel this year, down 2.2 percent from the September projection of $94.40, the department said today in its monthly Short-Term Energy Outlook. Prices have averaged $94.92 a barrel so far this year.
U.S. crude-oil stockpiles probably rose by 800,000 barrels last week, according to the median of 15 analyst estimates in a Bloomberg News survey before a weekly Energy Department report tomorrow. The industry-funded American Petroleum Institute publishes its weekly figures today. Both sets of data are being released a day later than usual because of this week’s Columbus Day holiday.
Oil volume in electronic trading on the Nymex was 297,081 contracts as of 11:38 a.m. in New York. Volume totaled 810,036 contracts yesterday, 21 percent above the average of the past three months. Open interest was 1.42 million contracts.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
