Oct. 26 (Bloomberg) -- Oil traded near its highest in 12 weeks in New York on speculation China’s government will boost the economy of the world’s second-biggest crude consumer, while European leaders prepared to tackle the region’s debt crisis.
Prices gained as much as 0.8 percent after China’s industry ministry said it is studying “stimulative policies” for smaller companies. Global oil supplies are “extraordinarily tight,” Goldman Sachs Group Inc. said. European government heads will hold a summit today.
“Crude oil has been extremely macro-driven lately because of the European crisis,” said Filip Petersson, commodity strategist at Stockholm-based SEB AB. “The general trends have been in the same direction as equities.”
Crude oil for December delivery was at $93.56 a barrel, up 39 cents, in electronic trading on the New York Mercantile Exchange at 1:07 p.m. London time. The contract yesterday increased 2.1 percent to $93.17, the highest settlement since Aug. 2. Prices are up 2.4 percent this year.
December futures were at a 19-cent premium to January, compared with 24 cents at yesterday’s close. The front-month contract settled higher than the next month Oct. 24 for the first time since Nov. 20, 2008. The so-called backwardation typically signals an increase in demand or decline in supply in the near term.
Brent oil for December settlement was down 6 cents, or 0.1 percent, at $110.86 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $17.32 to New York crude, compared with a record settlement of $27.88 on Oct. 14.
“At the moment, it is all to do with spreads,” Amrita Sen, a London-based analyst at Barclays Plc wrote in an e-mail. “All crudes should be in backwardation. Demand-supply mismatches are growing and inventories are falling fast.”
U.S. crude supplies in Cushing, Oklahoma, fell on Oct. 21 to the lowest level in a year, according to measurement of tanks using satellite photographs. Total U.S. inventories dropped to the lowest level in 20 months in the week ended Oct. 14, the Energy Department said last week.
Oil inventories are “dropping like a brick,” Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc., said at the World Commodities Week conference in London today. The oil market is “getting tighter by the minute.”
An Energy Department report today may show supplies increased 1.48 million barrels last week.
Chinese officials will make policy adjustments at a “suitable time and by an appropriate degree,” Chinese Premier Wen Jiabao said in a statement published late yesterday. The Ministry of Industry and Information Technology and other government agencies will work to help small businesses facing difficulties, it said separately in a statement today.
European leaders are in Brussels today for their 14th crisis summit in 21 months. A meeting of finance ministers scheduled to precede it was canceled, with officials now set to gather at an as-yet undetermined time to complete the rescue plan’s main elements.
Hurricane Rina churned across warm waters east of Belize toward Mexico’s Yucatan Peninsula today on a path expected to take it away from the major oil regions of the Gulf of Mexico, the National Hurricane Center said.
--With assistance from Ben Sharples in Melbourne and Grant Smith in London. Editors: John Buckley, Alessandro Vitelli
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