Bloomberg News

Oil Advances on Manufacturing Reports; Cushing Supplies Decline

September 01, 2011

Sept. 1 (Bloomberg) -- Oil advanced from a two-day low in New York as investors speculated that signs of manufacturing growth in China and the U.S. indicate fuel demand will increase in the world’s two biggest crude consumers.

Futures gained as much as 0.5 percent after China’s Purchasing Managers’ Index and U.S. factory orders climbed. Crude supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate oil, dropped a fifth week, according to the Energy Department. A report today may show U.S. jobless claims fell last week. Brent futures rose for an eighth day.

“We’ve got a reassuring PMI number from China, and if the U.S. turns out to have more jobs than expected, I think we’re off and running for Brent,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong and the most accurate forecaster for New York oil among analysts ranked by Bloomberg in the eight quarters ended June 30.

Oil for October delivery gained as much as 44 cents to $89.25 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.01 at 2:27 p.m. Singapore time. The contract yesterday fell 9 cents to $88.81. Prices dropped 7.2 percent last month and are down 2.6 percent this year.

Brent oil for October settlement climbed 14 cents to $114.99 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $25.94 to U.S. futures, compared with a record close of $26.21 on Aug. 19. The front-month contract’s 8-day winning streak is the longest since October 2009.

China Manufacturing

China’s PMI rose to 50.9 last month from a 29-month low of 50.7 in July, according to the China Federation of Logistics and Purchasing. A separate index by HSBC Holdings Plc and Markit Economics was 49.9, compared with 49.3 the prior month. A reading of 50 is the borderline between expansion and contraction.

Cushing stockpiles fell 577,000 barrels to 33.1 million, according to the Energy Department report yesterday. Total U.S. inventories increased 5.28 million barrels as Hurricane Irene approached.

Refinery utilization slid 1.1 percentage points to 89.2 percent, the report showed. That’s above the five-year average of 87.7 percent. Total products supplied, a measure of fuel demand, rose 1.7 percent to 19.6 million barrels a day, the first gain in three weeks.

“Large draws at Cushing and firm refinery utilization leave us bullish in our daily biases,” Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania, said in a note.

U.S. Orders

Oil capped its biggest monthly loss since May last month amid signs of slowing economic growth in the U.S. Prices rebounded today before a report that may show claims for U.S. unemployment benefits fell to 410,000 last week from 417,000 in the prior week, according to a Bloomberg survey of economists. Data yesterday showed orders placed with U.S. factories rose 2.4 percent in July, the most in four months.

Katia became the second Atlantic hurricane this year, according to an advisory by the National Hurricane Center at 11 p.m. New York time yesterday. Katia, rated category one, was about 1,165 miles (1,875 kilometers) east of the Leeward Islands with 75 mph winds and moving west-northwest at 20 mph, the advisory said. The storm may reach waters north of Puerto Rico by Sept. 4, the Miami-based center said.

While the storm is forecast to turn out to sea eventually, a shift westward could bring it to land in eastern Canada, according to private forecaster AccuWeather. Canada’s Atlantic region, a major gasoline supplier for the Northeast, exported 469,704 cubic meters (2.96 million barrels) of the fuel in May.

--Editors: Paul Gordon, Alexander Kwiatkowski

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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