BLBG:Oil Trades Near One-Week High On Bets China Will Boost Economy
Oil traded near the highest close in a week in New York, heading for a weekly gain, as investors speculated China’s government will boost the nation’s economy and the U.S. tightened sanctions on Iran.
Futures were little changed after rising 0.3 percent yesterday. Prices pared earlier losses amid speculation China will increase stimulus to spur an economic recovery. Gross domestic product in the world’s second-biggest crude user expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in more than three years, data from the National Bureau of Statistics showed.
“China may now stimulate at a quicker pace,” said David Lennox, an analyst at Fat Prophets in Sydney. “We’ll see Chinese authorities continue easing monetary policy. We’ll be expecting them to come out with further interest rate cuts or changes to the bank reserve ratio to stimulate internal growth.”
Crude for August delivery was at $86.20 a barrel, up 12 cents, in electronic trading on the New York Mercantile Exchange at 2:44 p.m. Singapore time. The contract rose 27 cents yesterday to $86.08, the highest close since July 5. Prices are up 2.1 percent this week and 13 percent lower this year.
Brent oil for August settlement on the London-based ICE Futures Europe exchange traded at $101.38 a barrel, up 31 cents. The European benchmark crude’s premium to the New York-traded West Texas Intermediate grade was at $15.18. The spread was $14.99 yesterday, the widest based on closing prices in a month.
Economic Slowdown
Oil may fall next week on concern weaker economic growth will reduce fuel demand, a Bloomberg News survey showed. Fourteen of 34 analysts and traders, or 41 percent, forecast crude will drop through July 20. Twelve respondents, or 35 percent, predicted futures will rise and eight said there will be little change.
Prices may also extend losses as the 100-day moving average has almost erased a premium to the 200-day mean, signaling a potential “death cross” chart formation, according to data compiled by Bloomberg. Investors typically sell contracts when a shorter moving average falls below a longer one.
China’s economy slowed to the weakest pace since the first three months of 2009, according to the statistics bureau. Oil refineries in the country processed 8.79 million barrels a day of crude in June, down 3.4 percent from May and the lowest level in eight months, separate data from the bureau showed.
Iran Sanctions
Oil in New York closed at a one-week high yesterday after the U.S. announced new sanctions on Iran. The government will target the National Iranian Tanker Co., 20 financial institutions and four “front companies” in Hong Kong, Malaysia, Dubai and Switzerland that it said are being used to evade international sanctions on the Persian Gulf nation’s oil trade, according to a Treasury Department statement yesterday.
U.S. officials said the intent is to encourage foreign companies to cease oil-related business with Iran until it meets international demands to abandon parts of its nuclear program. Iran pumped crude in June at close to the slowest rate in 22 years, the International Energy Agency said yesterday.
To contact the reporter on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
