Bloomberg News

Oil Rises as European Leaders Prep for Debt Talks

August 20, 2012

Oil traded near its highest closing level in three months in New York, the longest streak of gains in a month, before Europe’s leaders meet to discuss combating regional debt turmoil.

Crude advanced as much as 0.5 percent European policy makers plan a week of intensive shuttle diplomacy to help resolve the situation. The Obama administration said on Aug. 17 that a release from the nation’s Strategic Petroleum Reserve remains “an option that is on the table.” Saudi Arabia pumped at the highest level in more than three decades in June and monthly exports were the most since November 2005, according to the Joint Organization Data Initiative.

“I remain optimistic that a solution to the Euro crisis will be found,” said Michael Poulsen, an analyst at Global Risk Management in Middelfart, Denmark, who predicts prices will trade within a $4 range this week before advancing. “There is simply too much at stake to let the Euro project fail. From a longer perspective, upside bias for oil is warranted due to market fundamentals.”

Crude for September delivery was at $96.15, gaining 14 cents, in electronic trading on the New York Mercantile Exchange at 12:59 p.m. London time, having increased as much as 52 cents to $96.53 a barrel. It rose 0.4 percent to $96.01 on Aug. 17, the highest close since May 11. The contract expires tomorrow. The more-actively traded October future was at $96.45. Oil’s run of gains is the longest since the seven days ended July 19. Front-month prices are 2.7 percent lower this year.

Brent oil for October settlement climbed 66 cents, or 0.6 percent, to $114.34 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was at $17.91, from $17.39 on Aug. 17.

Bundesbank Criticism

Crude pared some of its advance after Germany’s Bundesbank stepped up its criticism of the European Central Bank’s plan to embark on potentially “unlimited” government bond purchases, widening a rift over how to tackle the sovereign debt crisis.

The Obama administration discussed planning for using the strategic petroleum reserve earlier this year when the average retail price of gasoline in the U.S. increased to almost $4 a gallon and the European Union prepared to impose a ban on Iranian oil imports.

“The administration does carefully monitor the global oil market” because of its impact on the economy, Josh Earnest, a White House spokesman, said at a briefing today.

Jean-Claude Juncker, the Luxembourg premier who heads the group of euro-area finance ministers, is expected in Athens on Aug. 22 to discuss Greek Prime Minister Antonis Samaras’ request of a two-year extension for the country’s fiscal adjustment program. Samaras travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

Saudi Arabia Production

Saudi Arabia’s output increased 3 percent to 10.1 million barrels a day in June from May, according to data submitted by the government to the Organization of Petroleum Exporting Countries and posted on JODI’s website yesterday. Exports were at 7.84 million barrels. The Middle East nation overtook Russia, which pumped 9.9 million barrels, as the world’s largest oil producer during the month, the data showed.

Net-long positions in oil held by money managers, including hedge funds, commodity pools and commodity trading advisers, retreated by 11,764, or 7.2 percent, to 152,222 futures and options combined in the seven days ended Aug. 14, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 17.

In London, hedge funds and other money managers raised bullish bets on Brent crude by 5,655 contracts to their highest level in three months in the week ended Aug. 14, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 96,614 lots, the London-based exchange said today in its weekly Commitment of Traders report. That’s the highest level since the week to May 15. Net longs were at 90,959 on Aug. 7, the data show.

To contact the reporter 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 on sev@bloomberg.net


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