Bloomberg News

Oil Near June High Heads for Weekly Gain on U.S. Economy, OPEC

June 10, 2011

June 10 (Bloomberg) -- Oil traded near the highest this month in New York, heading for the biggest weekly gain in four week, after the U.S. trade deficit unexpectedly narrowed and OPEC’s secretary-general said the group’s production quota system has been weakened.

Futures were little changed after the U.S. Commerce Department said record exports in April helped the trade gap shrink 6.7 percent to $43.7 billion, the lowest since December. A separate report showed jobless claims unexpectedly rose. The Organization of Petroleum Exporting Countries on June 8 was unable to reach an accord on targets for the first time in at least 20 years.

“It’s a complex trading pattern at the moment and the market will be quite happy to take it higher if they see good economic grounds,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted crude will average $100 a barrel this year. “The bulls and bears are firmly entrenched in a tug-of-war.”

Crude for July delivery was at $101.87 a barrel, down 6 cents, in electronic trading on the New York Mercantile Exchange at 2:03 p.m. Sydney time. The contract yesterday rose $1.19 to $101.93, the highest settlement since May 31. Prices are up 1.6 percent this week and 35 percent higher the past year.

Brent crude for July delivery gained 27 cents, or 0.2 percent, to $119.84 a barrel on the London-based ICE Futures Europe exchange. The contract yesterday increased $1.72, or 1.5 percent, to $119.57. It was the highest settlement since May 4.

Brent Premium

The European benchmark contract traded at a premium of $17.97 a barrel to U.S. futures today. The difference between front-month contracts in London and New York reached a record $19.54 on Feb. 21. It averaged 76 cents last year.

The U.S. trade deficit shrank as exports rose 1.3 percent, led by sales of fuel oil, petroleum products and computers, the Commerce Department said. The report prompted economists at Morgan Stanley to raise their estimates for second-quarter growth to an annual rate of 3.1 percent from 2.7 percent.

Crude oil imports declined by $2.42 billion as prices rose. The U.S. imported 8.41 million barrels per day on average in April, the fewest since October.

Consumer confidence improved as gasoline prices ebbed, a separate report showed. The Bloomberg Consumer Comfort Index climbed to minus 45.9 in the period to June 5, the best showing since the end of April, from the prior week’s minus 47.1.

Stocks Rise

Asian equities rose today, paring the regional benchmark index’s sixth weekly decline. The MSCI Asia Pacific Index increased 0.6 percent to 133.42 as of 10:45 a.m. in Tokyo, trimming this week’s drop to 0.4 percent. The Standard & Poor’s 500 Index climbed for the first time in seven days, gaining 0.7 percent to 1,289.

U.S. jobless claims rose by 1,000 to 427,000 last week, Labor Department figures showed yesterday. The number of people on unemployment benefit rolls and those receiving extended payments decreased.

OPEC’s quota system has been weakened by the need to replace lost oil from Libya, the group’s secretary general said after this week’s divided meeting. “I don’t want to say it is dead,” Abdalla el-Badri said yesterday in Vienna, referring to the group’s overall production target. “It is there, but we have to see how to replace Libya.”

A rebellion against Libyan leader Muammar Qaddafi has cut production in the North African country by almost 90 percent, according to Bloomberg estimates. Output slumped to 200,000 barrels a day last month, from an average of 1.55 million last year, according to data compiled by Bloomberg.

Saudi Arabia, OPEC’s biggest producer, Kuwait, Qatar and the United Arab Emirates were ready to supply more oil to the market, Saudi Oil Minister Ali al-Naimi said after the meeting. The four nations proposed a 1.5 million-barrel-a-day increase.

Libya, Angola, Ecuador, Algeria, Iran and Venezuela were opposed to higher limits, according to al-Naimi. Iraq is exempt from the targets.

--Editors: Paul Gordon, Ryan Woo

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 in Singapore at akwiatkowsk2@bloomberg.net


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