Bloomberg News

Oil Heads for Second Weekly Gain on EU Rescue Plan, U.S. Data

October 14, 2011

Oct. 14 (Bloomberg) -- Oil rose in New York, heading for a second weekly gain, as a rescue plan for Europe’s debt-laden economies took shape while better-than-forecast retail sales allayed concerns that the U.S. economy is slowing.

Prices rose as much as 2.7 percent, extending gains after the Commerce Department said that retail sales rose 1.1 percent last month, the biggest increase since February and higher than a 0.7 percent advance forecast by economists. Brent crude surged to its highest in a month. European officials are outlining a rescue plan that may include deeper investor losses on Greek bonds, higher bank capital levels and increased firepower for bailouts and the International Monetary Fund.

“The talk of recession is quieter,” said James Zhang, a strategist at Standard Bank Plc in London, who forecasts Brent will average $98 a barrel in the fourth quarter. “And the oil market itself has grown surprisingly tight. Inventories are very low, at least in Europe, as supplies are not coming back fast enough and, despite all the talk of slowdown, demand seems to be holding up.”

Crude for November delivery climbed as much as $2.25 to $86.48 a barrel in electronic trading on the New York Mercantile Exchange. It was at $86.19 at 1:53 p.m. London time. The contract fell 1.6 percent yesterday to the lowest close since Oct. 7. Prices are down 5.7 percent this year and up 3.9 percent for the week.

Brent oil for November settlement rose $2.29, or 2.1 percent, to $113.40 a barrel on the London-based ICE Futures Europe exchange. The European benchmark future, which expires today, reached a record premium of $27.73 a barrel to U.S. crude earlier today. The more-active December contract was up $2.26 at $111.46.

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Elements of the European plan emerged as finance ministers and central bankers from the Group of 20 began talks in Paris, and may be completed at an Oct. 23 summit to present to a gathering of G-20 chiefs Nov. 3-4.

Oil is also rising in New York as stochastic oscillators on the weekly technical chart show futures remain oversold, according to data compiled by Bloomberg. The price advance may continue, with prices rising as high as $88.86 a barrel, the lower of two leading-span lines that define a so-called “ichimoku cloud” on the weekly chart. The cloud is an area where buy orders may be clustered.

“The oil markets moving up or pulling down is dependent on the stock and financial markets,” said Ken Hasegawa, a commodity derivatives trading manager at broker Newedge in Tokyo. “Some of the U.S. data has been good recently. I don’t think the markets will move up sharply as there is still a lot of fear.”

--With assistance from Christian Schmollinger in Singapore. Editors: John Buckley, Raj Rajendran

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