BLBG:Crude Rises a Second Day in New York as Reports Boost Economic Optimism
Oil climbed a second day as signs of improvement in the U.S. and German economies bolstered speculation demand may rise and Iran advised Saudi Arabia against replacing Iranian supplies if sanctions are enacted.
Futures advanced as much as 0.6 percent, extending a 2 percent gain since Jan. 13. A U.S. Federal Reserve report showed manufacturing in the New York region expanded at the fastest pace in nine months, while German investor confidence jumped the most on record. Iran called on Saudi Arabia to be “wise and responsible in their approach” after the kingdom said it could make up any loss of supply from a European ban. Citigroup Inc. raised its 2012 Brent forecast to $110 a barrel.
“The market is now being very supported by tension over Iran,” said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo, who predicts New York crude will trade between $98 and $104 a barrel this month. “Still, we have a lot of uncertainty in Europe and this factor may subdue this market. We are seeing a natural rebound at the moment after the downgrade of several countries in Europe. Therefore I think the upper side is also limited.”
Crude for February delivery increased as much as 62 cents to $101.33 a barrel in electronic trading on the New York Mercantile Exchange. It was at $101.29 at 2:43 p.m. Sydney time. The contract surged $2.01 since Jan. 13 to $100.71, the highest since Jan. 11. Floor trading was closed Jan. 16 for the Martin Luther King Jr. holiday and electronic trades were booked with yesterday’s for settlement purposes.
Brent Forecast
Brent oil for March settlement climbed 53 cents, or 0.5 percent, to $112.06 on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $10.60, compared with $10.66 yesterday and a record $27.88 on Oct. 14.
Citigroup also increased its 2013 Brent forecast to $120 a barrel because spare production capacity is “too thin” given current supply risks, the bank said yesterday. Geopolitical concerns support oil at $100, while economic weakness is capping prices at $120, it said in an e-mailed report.
London-traded Brent may rise to $120 a barrel by the end of the year as demand climbs, SEB AB said in an e-mailed report yesterday. Prices may be capped at $110 in the first half in the absence of supply disruptions, it said.
Saudi Arabia can “easily” increase its crude production to as much as 11.8 million barrels a day to cover Iranian crude, Oil Minister Ali al-Naimi said in a CNN interview this week. The kingdom has the capacity to produce 12.5 million barrels a day and has an output of about 9.8 million, he said.
‘Wise and Responsible’
“If this comment is the official stance of Saudi Arabia we advise Saudi officials to be more wise and responsible in their approach,” Iranian Foreign Minister Ali Akbar Salehi said yesterday, according to the state-run Fars news agency.
Proposed European Union sanctions to block oil imports from Iran, to discourage the Persian Gulf state’s nuclear program, have raised the prospect that other suppliers may need to make up any shortfall. EU foreign ministers are scheduled to decide on the ban at a Jan. 23 meeting.
The U.S. asked South Korea to halve oil imports from Iran, the Dong-A Ilbo newspaper reported today, citing an unidentified government official. South Korea’s stance is to cut shipments by about 30 percent, the newspaper said.
Enterprise Start
The Federal Reserve Bank of New York’s general economic index rose to 13.5, the highest level since April, from a revised 8.2 in December. That gauge exceeded the median forecast of 56 economists surveyed by Bloomberg News, which projected an increase to 11. A separate report yesterday showed that German investor confidence jumped the most on record in January.
An Energy Department report tomorrow will probably show that U.S. crude stockpiles rose 3 million barrels last week, according to the median of nine analyst estimates in a Bloomberg News survey. The increase will be a fourth week of gains.
Oil’s advance in New York may stall as stochastic oscillators on the daily and weekly charts remain above 70, signaling futures have increased too quickly, according to data compiled by Bloomberg. Investors tend to sell contracts when prices are considered overbought.
Enterprise Products Partners LP (EPD) plans to start shipping oil on the Seaway pipeline from Cushing, Oklahoma, the delivery point for West Texas Intermediate futures, to the U.S. Gulf Coast June 1 after the line is reversed.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Yee Kai Pin in Singapore at kyee13@bloomberg.net;
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
