BLBG:Oil Gains On U.S. Stockpile Drop, Stimulus Speculation
Oil rose for a third day in New York after stockpiles declined more than analysts projected and speculation mounted that central banks in the U.S. and China will boost economic stimulus.
Futures advanced as much as 1.1 percent after closing at the highest level in more than three months yesterday. Crude inventories shrank 5.4 million barrels last week, the Energy Department said. They were forecast to drop by 250,000 barrels. Minutes from a U.S. Federal Reserve meeting showed many policy makers backed more monetary easing, while China’s central bank governor, Zhou Xiaochuan, said adjustments to interest rates and banks’ reserve requirements are still possible.
“We had pretty supportive news for commodity markets from the Fed,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The wording was explicit and it seems likely that there is going to be easing. Inventories are heading the right way and the decline was larger than expected.”
Oil for October delivery gained as much as $1.03 to $98.29 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.10 at 2:50 p.m. Singapore time. The contract yesterday climbed 0.4 percent to $97.26, the highest close since May 7. Prices are 0.7 percent lower this year.
Brent oil for October settlement gained 92 cents, or 0.8 percent, to $115.83 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was at $17.73, from $17.65 yesterday.
Fuel Stockpiles
Oil is extending its rally in New York after rising above long-term technical resistance. Futures yesterday settled higher than the 200-day moving average for the first time since May 10, according to data compiled by Bloomberg. Investors typically buy contracts when chart resistance is breached.
Gasoline inventories in the Energy Department report fell 962,000 barrels versus a forecast drop of 1.35 million in the Bloomberg survey. Distillate supplies, which include heating oil and diesel, rose 992,000 barrels, near the predicted gain of 1 million.
Members at the Federal Open Market Committee’s gathering that ended Aug. 1 indicated monetary easing will be needed “fairly soon” unless there are signs of a durable economic pickup, the minutes showed. Many participants said a new large- scale asset-purchase program “could provide additional support for the economic recovery.”
China Outlook
Zhou’s comments in Beijing leave the door open for further monetary stimulus after the People’s Bank of China added 220 billion yuan ($34.6 billion) to the banking system via reverse- repurchase agreements yesterday. Chinese Premier Wen Jiabao said last week that easing inflation allows more room to adjust monetary policy.
Oil briefly pared gains after a report showed Chinese manufacturing probably contracted at a faster pace this month. The preliminary August reading was 47.8 for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics. If confirmed, it would be the weakest level since November. A reading below 50 indicates a contraction.
The U.S. and China are the world’s biggest oil users, accounting for a combined 32 percent of the world’s consumption, according to BP Plc (BP/)’s Statistical Review of World Energy.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
