Bloomberg News

Oil Advances a Second Day on Asian Economic Growth, Europe Plan

October 24, 2011

Oct. 24 (Bloomberg) -- Oil gained for a second day in New York as European leaders made progress with their debt rescue fund, while economic data from Asia signaled that growth is holding up in the region’s two biggest crude consumers.

Futures climbed as much as 1.4 percent after reports showed Japanese exports rose more than forecast last month and Chinese manufacturing may expand at the fastest pace in five months in October. Europe may agree on a blueprint to rein in the debt crisis at an Oct. 26 summit after leaders yesterday said they’ll aid banks.

“The narrative is that weak demand in developed economies is more than offset by burgeoning demand in developing ones,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who last month correctly predicted Brent prices wouldn’t remain below $100 a barrel. “Chinese demand growth is likely to prevent prices from falling through the floor.”

Oil for December delivery was at $87.90 a barrel, up 50 cents on the New York Mercantile Exchange at 1:12 p.m. London time. Prices are down 3.8 percent this year.

Brent crude for December settlement advanced 91 cents, or 0.8 percent, to $110.47 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract traded $22.57 higher than New York futures, compared with a record settlement of $27.88 on Oct. 14.

Exports, Hedge Funds

Japanese exports rose 2.4 percent in September from a year earlier as demand for cars and auto parts increased, the Ministry of Finance said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg was for a 1 percent increase. China’s manufacturing may expand this month for the first time since June, according to a preliminary index of purchasing managers by HSBC Holdings Plc and Markit Economics.

Hedge funds boosted bullish bets on oil by the most in five weeks, a report on Oct. 21 showed. Money managers added to wagers on rising U.S. prices by 8.7 percent in the seven days ended Oct. 18, according to the Commodity Futures Trading Commission’s Commitments of Traders report.

In London, hedge funds and other money managers boosted bullish bets on Brent crude by 32 percent in the week ended Oct. 18, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 54,208 contracts, the London-based exchange said today in its weekly Commitment of Traders report. Net-long positions rose by 13,204 contracts, from 41,004 a week earlier.

Libya Production

OPEC will consider altering output in response to an increase in Libyan production, Kuwait’s Oil Minister Mohammad al-Busairy told reporters at a conference at the Dead Sea in Jordan yesterday. Current prices are reasonable for exporters and importers, al-Busairy said. The Organization of Petroleum Exporting Countries is scheduled to meet Dec. 14 in Vienna.

Saudi Arabia, OPEC’s largest oil producer, is waiting for a successor to its crown prince after the death of Sultan bin Abdulaziz Al Saud. The country raised crude supply this year after exports from Libya collapsed during the uprising against Muammar Qaddafi. It boosted production after failing to get OPEC to adopt a 1.5 million-barrel-a-day output increase at a meeting in June.

Companies including Eni SpA, Libya’s biggest foreign investor, and Total SA have returned as fighting has ebbed. Supply may rebound to 750,000 barrels a day by the end of the year from 430,000 barrels a day now, Nuri Berruien, chairman of state-run National Oil Corp. said Oct. 20. Output was 1.6 million barrels a day in January.

“The market is still riding on optimism,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney.

--With assistance from Yee Kai Pin and Ann Koh in Singapore. Editors: John Buckley, Rob Verdonck

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 at sev@bloomberg.net


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