BLBG:Oil Rebounds After Five-Day Loss on U.S. Outlook, Japan Spending
Oil rebounded after falling for five days in New York, the longest losing streak since May, on speculation losses were excessive before reports that may show an improvement in the U.S. economy.
Futures gained as much as 0.7 percent after sliding yesterday to the lowest in three months, sending the 14-day relative strength index to 31.6. A reading below 30 indicates prices may be oversold. Data released this week may show U.S. orders for durable goods rose last month, while gross domestic product accelerated in the third quarter. In Japan, Nikkei reported the Bank of Japan (8301) may increase its asset-purchase plan.
“The price is quite oversold,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Everybody is positive on the Japanese equity market today from expectations that the Bank of Japan may ease policies.”
West Texas Intermediate oil for December delivery rose as much as 58 cents to $86.31 a barrel in electronic trading on the New York Mercantile Exchange. It was at $86.18 at 3:20 p.m. Singapore time. The contract settled at $85.73 yesterday, the lowest since July 10.
Brent oil for December settlement on the ICE Futures Europe exchange was at $108.41 a barrel, up 56 cents. The contract yesterday declined for a seventh day, the longest losing streak since July 2010. The European benchmark crude was at a premium of $22.32 to WTI, from $22.12 yesterday.
Relative Strength
Oil is rebounding in New York after yesterday’s drop sent the relative strength index to the lowest since June 28. Crude climbed from a nine-month low in June when the RSI slid below 30, signaling the market was oversold. Today’s reading is 33.7.
U.S. orders for durable goods rose 7.5 percent last month, according to a Bloomberg survey of 77 economists conducted before today’s report from the Commerce Department.
The department may report tomorrow that U.S. gross domestic product grew at a 1.9 percent annual pace in the three months ended Sept. 30, up from 1.3 percent the previous quarter, economists forecast.
“I’m looking at data in the service area in particular that could see some upside surprise to those positive estimates,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “That will be a reminder to all markets, but particularly oil markets, of the much-improved U.S. economic situation.”
Japan’s central bank will consider increasing its asset- purchase program by 10 trillion yen ($125 billion) to 90 trillion yen at an Oct. 30 policy meeting, the Nikkei newspaper reported. The U.S. Federal Reserve yesterday said it will maintain stimulus after last month committing to a third round of bond purchases because it expects only a moderate economic recovery.
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
