Bloomberg News

Oil Halts Two-Day Drop in London; Barclays Raises 2012 Forecast

July 05, 2011

July 5 (Bloomberg) -- Oil halted a two-day drop in London on speculation of rising oil-demand growth in the U.S. and China, the world’s two largest energy users.

Brent reversed losses of as much as 0.8 percent. Orders placed with U.S. factories rebounded in May, according to a Bloomberg News survey before a Commerce Department report today. The People’s Bank of China said yesterday the country faces inflationary pressure and the central bank will maintain a “prudent” monetary policy. Barclays Plc boosted its 2012 Brent price forecast by $10 to $115 a barrel.

“Demand forecasts show a continuation of robust emerging market demand,” Barclays analysts led by Paul Horsnell in London wrote in a report today. “China remains the strongest individual component of global oil demand.”

Brent for August settlement climbed as much as $1.43, or 1.3 percent, to $112.82 a barrel on the ICE Futures Europe exchange, and traded for $112.27 as of 12:08 p.m. London time.

On the New York Mercantile Exchange, crude for August delivery was at $95.50 a barrel in electronic trading, 59 cents higher. Floor trading was closed yesterday for the U.S. Independence Day holiday and electronic trades will be booked with today’s transactions for settlement purposes. Futures are up 31 percent in the past year.

Chinese lenders may have greater exposure to bad local- government loans than anticipated, Moody’s Investors Service said. Bank loans to local governments are about 3.5 trillion yuan ($540 billion) more than official estimates, and the credit outlook for the industry could decline, Moody’s said.

Sacrifice Growth

“We do not think China will sacrifice its growth to contain inflation,” said Harry Tchilinguirian, London-based head of commodity-markets strategy at BNP Paribas SA.

Global oil demand will increase by 1.38 million barrels a day next year to average 90.6 million, Barclays analysts said.

New York futures fell 4.6 percent on June 23 after the International Energy Agency, an adviser to 28 oil-consuming nations, said its members will release 60 million barrels of crude and oil products. The Organization of Petroleum Exporting Countries failed to agree on June 8 to increase production to make up for a supply shortfall in Libya. OPEC’s 12 members pump about 40 percent of the world’s crude.

--Editors: Raj Rajendran, Bruce Stanley.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net


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