Bloomberg News

Oil Slips From Highest in a Month as Germany Damps Rescue Hopes

October 17, 2011

Oct. 17 (Bloomberg) -- Oil slipped from its highest in a month in New York after Germany criticized as unrealistic hopes for a swift resolution to Europe’s debt crisis.

West Texas Intermediate crude futures were little changed, retreated from an earlier high above $88 a barrel. German Chancellor Angela Merkel, speaking at a briefing in Berlin today, dismissed expectations that rescue plans to be announced at an Oct. 23 summit will speedily address Europe’s problems as “dreams.” Crude had advanced on forecasts that China may say tomorrow its economy grew more than 9 percent last quarter.

“There’s optimism that a comprehensive solution for the euro zone debt crisis will be unveiled at the EU summit next week,” said Carsten Fritsch, an analyst in Frankfurt at Commerzbank AG, the fourth most-accurate forecaster of oil prices in the third quarter. “But there is huge potential for disappointment if announcements fall short of expectations, which is very likely.”

Crude for November delivery was at $86.83 a barrel, 3 cents higher in electronic trading on the New York Mercantile Exchange at 1:10 p.m. London time. Earlier it gained as much as $1.38 to $88.18 a barrel, the highest since Sept. 16.

Brent oil for December settlement fell 60 cents to $111.63 a barrel on the London-based ICE Futures Europe exchange. Front- month futures rose 7.8 percent last week.

The spread between December West Texas and Brent oil was at $24.55 a barrel today, according to data compiled by Bloomberg. The price difference narrowed from $27.88 on Oct. 14 as the London-traded future for November expired.

Hedge-Fund Bets

Hedge funds raised bullish oil bets by 7.8 percent in the week ended Oct. 11, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Oct. 14. Net-long positions betting on rising prices in WTI oil held by hedge funds, commodity pools and commodity-trading advisers, in futures and options combined increased 11,389 to 157,693.

In London, speculative bets that Brent prices will rise, in futures and options combined, outnumbered short positions by 41,004 contracts, the London-based ICE Futures Europe exchange said today in its weekly Commitment of Traders report. Net-long positions rose by 11,911 contracts, from 29,093 a week earlier.

Prices gained earlier today on speculation China’s economy will maintain growth rates. Gross domestic product in the nation, the world’s second-biggest consumer of crude, increased 9.3 percent in the third quarter from a year earlier, according to the median estimate of 22 economists in a Bloomberg News survey. That would be the ninth straight quarter of expansion above 9 percent and follow a 9.5 percent gain in the previous three months in China, the second biggest crude-consuming nation behind the U.S.

“It does look as if that extremely pessimistic view that the world was heading into recession, if not depression, is now changing and the overall investment view is what we’re looking at is a low-growth environment,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney. “Confirmation of the growth story in China will be important.”

-- Editors: John Buckley, Raj Rajendran

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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