Bloomberg News

Oil Rises From Two-Day Low as China Pledges Help on Europe Debt

February 15, 2012

Feb. 15 (Bloomberg) -- Oil rose after China pledged to help resolve Europe’s debt crisis, easing concern that economic growth will slow and curb fuel demand. Brent crude may advance to $120 a barrel, according to Goldman Sachs Group Inc.

Crude futures in New York increased as much as 1 percent, rebounding from a two-day low. China will invest in Europe’s bailout funds, the nation’s central bank governor Zhou Xiaochuan said in Beijing. European Union finance ministers will today prod Greece to deliver budget cuts in exchange for a second aid package. The world’s oil market is increasingly vulnerable to rising prices as spare production capacity declines, Goldman Sachs said.

“OPEC spare capacity is approaching dangerously low levels, just as world economic growth is beginning to strengthen,” David Greely, head of energy research at Goldman Sachs in New York, said in the report dated yesterday. Measures by the European Central Bank and Greece “have substantially reduced the risk of a systemic financial event in Europe,” he said.

Oil for March delivery rose as much as $1.02 to $101.76 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.53 at 4:13 p.m. Singapore time. It fell 17 cents to $100.74 yesterday, the lowest close since Feb. 10. Prices are 20 percent higher the past year.

Brent oil for April settlement gained 61 cents to $117.96 a barrel on the ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate for the same month was at $16.14, compared with $17.42 yesterday.

Global Crude Stockpiles

Spare crude-output capacity at the Organization of Petroleum Exporting Countries is down 26 percent since March to 4.685 million barrels a day in January, according to data compiled by Bloomberg. That’s the lowest level since November 2008.

Global stockpiles are increasing more slowly than the five- year average, Greely said. Inventories held by the 34 nations in the Organization of Economic Cooperation and Development climbed by 11.4 million barrels in January, less than the five-year average increase of 43.2 million, according to preliminary data in the International Energy Agency’s Monthly Oil Market report.

Zhou’s remarks in China echoed comments by Premier Wen Jiabao yesterday and sparked optimism Europe will overcome a debt crisis that threatens renewed market turmoil. EU finance ministers will hold a teleconference today to urge Greece to do more to clinch an aid package worth 130 billion euros ($171 billion) and about 100 billion euros of debt relief from private bondholders. The nation’s two biggest political parties will provide written commitments to austerity pledges, a government official in Athens said.

Oil ‘Well Bid’

Oil “remains relatively well bid as if the market is optimistic that something will occur in Europe,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney, who forecasts New York crude may rise to $104 a barrel if it breaks through technical resistance at $102.50.

New York prices fluctuated earlier after reports showed a rise in stockpiles and a slump in gasoline demand in the U.S., the world’s biggest oil user.

Crude stockpiles climbed 2.9 million barrels last week, the American Petroleum Institute said. An Energy Department report today is forecast to show a gain of 1.5 million barrels, according to a Bloomberg News survey of analysts.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Gasoline Demand

Motor fuel demand slid to the lowest level since MasterCard Inc.’s SpendingPulse report started in July 2004. U.S. drivers bought 8.01 million barrels of gasoline a day in the seven days ended Feb. 10, down 3.1 percent from a week earlier, the report showed. Gasoline use over the previous four weeks was 5.3 percent below the 2011 period, the 47th consecutive decline in that measure.

The U.S. accounts for about 21 percent of the world’s oil use and the EU consumes about 16 percent of the world’s oil demand, according to BP Plc’s Statistical Review of World Energy.

--Editors: Paul Gordon, Mike Anderson

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net


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