BLBG:Crude Rises From One-Week Low as Japan Industrial Output Beats Estimates
Oil rose as investors speculated that fuel demand may climb after industrial output in Japan, the world’s third-largest crude consumer, gained more than forecast.
Futures increased as much as 0.8 percent in New York after slipping yesterday to the lowest price in more than a week. Japanese factory production climbed 4 percent last month, the most in seven months, the trade ministry said today in Tokyo. Major progress was made in debt-swap talks with bondholders, Greek Prime Minister Lucas Papademos said after a European Union summit in Brussels. Iran has threatened to cut off oil shipments to EU countries ahead of a planned embargo.
“Japan industrial production is better than expectations,” said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo who predicts crude will trade in a range of $97 and $103 a barrel in New York. “That drove the stock market on the bullish side and the oil market on the bullish side,” he said. Hasegawa also cited the dollar’s slide against the euro, which traditionally boosts the appeal of commodities including oil as alternative investments.
Crude for March delivery gained as much as 79 cents to $99.57 a barrel in electronic trading on the New York Mercantile Exchange. It was at $99.34 at 2 p.m. Singapore time. The contract yesterday fell 78 cents to $98.78, the lowest level since Jan. 20. Prices are 0.5 percent higher this month.
Brent oil for March settlement advanced 64 cents, or 0.6 percent, to $111.39 a barrel on the London-based ICE Futures Europe exchange for a gain of 3.8 percent this month. The European benchmark contract’s premium to West Texas Intermediate futures was at $12.08, compared with $11.97 yesterday and a record $27.88 on Oct. 14.
Industrial Output
Japan’s industrial output beat economists’ median estimate of a 3 percent gain, according to a Bloomberg News survey. Manufacturers plan to raise production 2.5 percent this month and boost it 1.2 percent in February, a government survey of companies in the report showed.
The country will consume 4.48 million barrels a day of oil in 2011, according to the International Energy Agency’s monthly oil market report on Dec. 18. That makes Japan the third largest user after China and the U.S.
Asian equities advanced and the dollar weakened after Papademos, speaking after the EU meeting in Brussels, indicated that Europe will find a way out of its debt problems.
The MSCI Asia Pacific Index added 0.4 percent to 122.63 today in Tokyo after swinging between gains and losses at least eight times. The measure has risen 7.7 percent this month and is set for the biggest advance since September 2010. The dollar dropped 0.3 percent to $1.3187 to the euro.
Iranian Tension
Tensions in Iran are putting pressure on oil prices, even as officials in Saudi Arabia say the market has ample supply. Iran is at loggerheads with Western countries over accusations that its nuclear program is a cover for weapons. EU foreign ministers agreed last week to ban Iranian oil imports starting in July and freeze the assets of the country’s central bank.
Global oil markets are “very well supplied,” according to Abdalla El-Badri, the head of the Organization of Petroleum Exporting Countries. Any disruption to shipping in the Persian Gulf, as threatened by Iranian officials in response to a European embargo on the country’s oil exports, is unlikely, he said yesterday in London.
Saudi Arabia, the largest producer in OPEC, has capacity to replace any supply that disappears, the country’s oil minister, Ali Al-Naimi, said at the same event.
U.S. Stockpiles
Oil inventories in the U.S. rose for the fifth time in six weeks as refineries processed less in response to lower gasoline demand, a Bloomberg News survey showed. A build in crude oil typically puts downward pressure on prices.
Stockpiles rose 2.5 million barrels, or 0.7 percent, to 337.3 million in the seven days ended Jan. 27, according to the median of seven analyst estimates before tomorrow’s weekly Energy Department report. An increase of that size would leave inventories at the highest level since the week ended Nov. 4. Six of the respondents projected a gain and one a decline.
U.S. refiners and the union representing more than 30,000 workers have been unable to agree on a new three-year labor contract because the industry hasn’t addressed demands for health and safety improvements, according to three union representatives familiar with negotiations.
Hedge funds and other money managers increased bullish bets on Brent crude. Speculative positions that prices will rise increased by 404 contracts, or 0.5 percent, in the week ended Jan. 24, according to data from ICE Futures Europe.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net
To contact the editor responsible for this story: Mike Anderson in Singapore at manderson34@bloomberg.net.
