Bloomberg News

Oil Gains First Day in Four on Optimism Europe Crisis Will Ease

September 26, 2011

Sept. 26 (Bloomberg) -- Oil advanced for the first time in four days in New York amid speculation that the European Central Bank may alleviate the region’s sovereign debt crisis, boosting growth and fuel demand.

Futures gained 0.5 percent after a euro-region central bank official, who declined to be identified, said policy makers are likely to debate the resumption of covered-bond purchases next week. Oil reached the lowest level since Aug. 9 in intraday trading on concern that the crisis would trigger another recession.

“There’s some talk that the European policy makers are putting together some new measures to ease the region’s debt crisis,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “That’s making the markets a little more stable.”

Crude for November delivery rose 39 cents to settle at $80.24 a barrel on the New York Mercantile Exchange, the first increase in four sessions. Prices ranged from $77.11 to $81.29. Oil is down 9.6 percent this month and 16 percent in the third quarter.

Implied volatility for at-the-money options expiring in November, a measure of expected price swings in futures and a gauge of options prices, jumped to 49.2 percent at 2 p.m. in New York, the highest level for the contract nearest to expiration since Aug. 9.

Brent futures for November settlement slipped 3 cents to $103.94 a barrel on the London-based ICE Futures Europe exchange.

Euro, Commodities

The reintroduction of 12-month loans to banks will be discussed at the ECB’s Oct. 6 policy meeting, according to the central bank official, who spoke on condition of anonymity because the information is confidential. Interest-rate cuts are likely to be discussed, though they are not on the current agenda, the official said.

“There’s a little optimism in Europe, optimism that they are getting a new Greek package together,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “It’s not enough to get this market to move around strongly.”

The euro traded at $1.3492 at 3:19 p.m. in New York, little changed from $1.35 on Sept. 23. Earlier, it touched $1.3363, the lowest level since Jan. 18. A weaker euro curbs the appeal of commodities as an alternative investment to the U.S. dollar.

The Standard & Poor’s GSCI Index of 24 commodities gained 0.2 percent to 600.37. Earlier, it touched 583.68, the lowest intraday level since Dec. 1. Metals including lead and gold led the decliners.

U.S. Home Sales

Prices fell in intraday trading after a report that purchases of new houses in the U.S. declined in August.

Sales, tabulated when contracts are signed, dropped 2.3 percent to a 295,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of 73 economists in a Bloomberg News survey called for a decline to 293,000. The median price slumped 7.7 percent from August 2010, the steepest 12-month drop since July 2009.

“People are scared,” said Phil Flynn, vice president for research at PFGBest in Chicago. “Oil is acting weak right now but if the European situation gets settled, I think oil will go back up. The housing numbers were weak. We were trying to get optimistic and then were blinded by a bad economic number.”

Saudi Arabia, the world’s largest crude exporter, may cut production to prevent prices falling below $90 a barrel in London, according to HSBC Holdings Plc.

The European financial crisis and general fears about the global economy have weakened demand for crude, Qatari Oil Minister Mohammed Saleh al Sada said yesterday in Doha.

Libyan Supplies

Harouge Oil Operations, a joint venture between Libya’s state-owned National Oil Corp. and PetroCanada, will begin pumping crude from the country’s Amal field in a “few weeks,” the company’s chairman said. Full output of 100,000 barrels a day is expected to be reached by year’s end, Abdulwahab Elnaami said yesterday at his office in the Libyan capital Tripoli.

Fighting in Libya since February has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.

“If the world economy manages to generate some growth, albeit it at a slower pace, we would expect oil prices to remain well supported above $90 to $100” for Brent crude, said Amrita Sen, a commodities analyst at Barclays Plc in London.

Oil volume in electronic trading on the Nymex was 485,351 contracts as of 3:21 p.m. in New York. Volume totaled 797,647 contracts Sept. 23, 20 percent above the average of the past three months. Open interest was 1.37 million contracts.

--With assistance from Mark Shenk in New York and Grant Smith in London. Editors: Richard Stubbe, Bill Banker

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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