Bloomberg News

Oil Rises First Time in Four Days on Jobs Data, Fed Forecast

November 02, 2011

Nov. 2 (Bloomberg) -- Oil rose for the first time in four days in New York as a private report showed U.S. companies added more jobs than forecast.

Oil gained 0.4 percent after ADP Employer Services said companies added 110,000 workers in October. The median forecast was 100,000 in a Bloomberg survey. Prices reduced earlier gains in afternoon trading after the Federal Reserve said U.S. gross domestic product will grow less this year than it had predicted earlier.

“The ADP jobs number definitely suggested that this economy is not in a recession,” said Phil Flynn, an analyst with PFGBest in Chicago. “The Fed lowered its economic forecast, but it’s still a decent growth rate.”

Crude oil for December delivery rose 32 cents to settle at $92.51 a barrel on the New York Mercantile Exchange. Oil has advanced 17 percent in the fourth quarter.

Brent oil for December settlement fell 20 cents to settle at $109.34 a barrel on the London-based ICE Futures Europe exchange.

The five Fed Board members and 12 reserve bank presidents reduced their growth forecast to a range of 2.5 percent to 2.9 percent from a June prediction of 3.3 percent to 3.7 percent.

Fed Sees Growth

The forecasts were released after the Federal Open Market Committee today acknowledged economic growth “strengthened somewhat” in the third quarter while also citing “continuing weakness” in labor markets and “significant downside risks” to the economic outlook. The Fed also refrained from undertaking new stimulus plans.

“The Fed seemed to back away a little bit from another round of quantitative easing and without that, some of the gains in oil are being given back,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.

The Dollar Index, which tracks the U.S. currency against six major peers, pared losses, falling 0.3 percent to 77.046 after dropping as low as 76.706. A weaker dollar raises crude’s appeal as an alternative investment.

Oil also pared gains when the Energy Department reported that crude supplies rose 1.83 million barrels to 339.5 million in the week ended Oct. 28. Inventories were forecast to rise 1 million barrels, according to the median of 13 analyst estimates in a Bloomberg News survey.

’Knee-Jerk Response’

“We had a knee-jerk response to the inventory numbers, but at the end of the day, the question is whether we are going to see true growth in the economy,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado.

Gasoline stockpiles rose 1.36 million barrels to 206.3 million. The median estimate was a decline of 800,000.

Inventories of distillate fuels, which include heating oil and jet fuel, dropped 3.58 million barrels to 141.9 million. The median estimate was a decline of 1.75 million.

Yesterday, the American Petroleum Institute said gasoline stockpiles fell 1.13 million barrels and distillates were down 3.44 million. Crude inventories slid 156,000 barrels, according to the industry group.

Goldman Sachs Group Inc. today recommended investors take a long position on New York oil contracts for December 2012 as crude stockpiles decline at the delivery hub of Cushing, Oklahoma, and in the U.S. Midwest. It also recommended buying Brent futures for July 2012 rather than December 2012.

Cushing Inventories

West Texas Intermediate oil traded on the Nymex has rallied amid “receding concerns” that Europe’s debt crisis will curb economic growth and a decline in crude stockpiles at Cushing, Goldman said today in an e-mailed report. Cushing inventories dropped to 32.1 million barrels last week from the 2011 high of 41.9 million on April 8.

“The euro-zone issue remains a key factor driving both financial markets and oil markets,” Victor Shum, a senior principal at Purvin & Gertz Inc., a consultant in Singapore, said by phone. “But there are supply-demand issues that in my view support stronger oil prices. From the demand side of the equation, we are likely to see a tightening balance.”

European leaders are preparing to tell Greek Prime Minister George Papandreou he has no alternative to the budget cuts imposed in a debt-crisis strategy that they are racing to prevent from unraveling.

Papandreou was summoned to Cannes, France, for emergency talks on the eve of a Group of 20 summit where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through a deal hammered out in a six- day crisis-management marathon.

Oil volume in electronic trading on the Nymex was 437,596 contracts as of 3:12 p.m. in New York. Volume totaled 648,158 contracts yesterday, 7.1 percent below the three-month average. Open interest was 1.35 million contracts.

--With assistance from Grant Smith in London, Yee Kai Pin in Singapore and Shobhana Chandra in Washington. Editors: Richard Stubbe, Dan Stets

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;

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


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