Bloomberg News

Crude Oil Snaps Three Days of Declines on Signs of China Growth

February 01, 2012

Feb. 1 (Bloomberg) -- Oil snapped three days of declines in New York after China’s manufacturing index unexpectedly rose, boosting speculation that the world’s second-biggest crude consumer is withstanding Europe’s debt crisis.

Futures gained as much as 0.9 percent after China’s purchasing managers’ index rose to 50.5 from 50.3 in December. The median estimate in a Bloomberg News survey was for a reading below the 50 level that marks the difference between expansion and contraction. Oil pared gains after a report from ADP Employer Services showed U.S. companies added fewer workers to payrolls in January than economists estimated.

“Today’s Chinese data was good, and oil is rising in line with other markets,” said Eugen Weinberg, the head of commodities research at Commerzbank AG in Frankfurt. “The liquidity situation is extremely good. The market is flooded with money right now from the central banks. Interest rates are at extremely low levels, so it is a very generous situation for financial market participants.”

Crude for March delivery increased as much as 89 cents to $99.37 in electronic trading on the New York Mercantile Exchange and traded at $98.87 at 1:19 p.m. London time. The contract yesterday declined 0.3 percent to $98.48 a barrel, the lowest close since Jan. 20. Prices slid 0.4 percent in January, falling for a second month.

Brent oil for March settlement gained $1.12 to $112.10 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures traded at $13.23, compared with a record spread of $27.88 on Oct. 14.

Iranian Risk Premium

The European Union said last month it will ban Iranian oil imports starting in July and freeze the assets of the country’s central bank as part of sanctions against the Persian Gulf nation’s nuclear program.

“We still have a significant Iranian risk premium,” Phil Flynn, vice president of research at PFGBest in Chicago, said in an e-mailed response to questions.

Following this week’s trip to Iran by a team from the International Atomic Energy Agency, Chief Inspector Herman Nackaerts told reporters in Vienna today the visit was “good” and that another trip will be likely.

Oil in New York has technical resistance along the 50-day moving average around $99.17 a barrel today, according to data compiled by Bloomberg. Futures settled below that indicator in the previous two days. Investors tend to sell contracts close to chart-resistance levels.

Stockpile Reports

U.S. crude inventories rose by 2.1 million barrels last week to 339.5 million barrels, the highest since the week ended Nov. 11, data from the American Petroleum Institute showed yesterday. An Energy Department report today may show they increased by 2.6 million barrels, according to the median of 12 analyst estimates in a Bloomberg News survey. Gasoline supplies are projected to rise 500,000 barrels, according to the survey.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The Energy Department requires that reports be filed for its weekly survey, which is scheduled to be released at 10:30 a.m. in Washington today.

U.S. drivers bought 8.51 million barrels a day of gasoline in the week ended Jan. 27, according to MasterCard Inc.’s SpendingPulse report on Jan. 31. While that was up from 8.48 million the prior week, fuel demand fell below year-earlier levels for the 22nd consecutive time last week, declining 5.5 percent from 2011, the report said.

--With assistance from Yee Kai Pin in Singapore, Ben Sharples in Melbourne and Jonathan Tirone in Vienna. Editors: John Buckley, Rachel Graham

To contact the reporters on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net; Ayesha Daya in Dubai at adaya1@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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