Bloomberg News

Oil Rises From Four-Month Low After U.S. Jobless Claims

November 08, 2012

Oil climbed from a four-month low after fewer Americans than forecast filed claims for unemployment insurance and Greek lawmakers approved a package of austerity measures needed to unlock further financial aid.

Futures rose 0.8 percent as the Labor Department said applications for jobless benefits fell by 8,000 to 355,000 last week. The Greek Parliament passed a bill on pension, wage and benefit cuts. Oil gave up some of its intraday gains as equities declined and the euro reached a two-month low versus the dollar.

“Unemployment claims fell further, which is a hopeful signal about the economy,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Concerns about the euro-zone have eased again with the passage of further austerity measures in Greece.”

Crude oil for December delivery rose 65 cents to settle at $85.09 a barrel on the New York Mercantile Exchange. The contract dropped $4.27 yesterday to $84.44, the lowest settlement since July 10. Prices are down 14 percent this year.

Brent oil for December settlement increased 43 cents, or 0.4 percent, to end the session at $107.25 a barrel on the London-based ICE Futures Europe exchange.

Economists forecast jobless claims would be little changed from the prior week at 365,000, according to the median estimate in a Bloomberg survey.

Beating Expectations

“The jobless claims are better than expected,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The labor picture seems to be stabilizing.”

Consumer confidence climbed last week as Americans’ ratings of the economy reached the highest level in more than four years. The Bloomberg Consumer Comfort Index rose to minus 34.4 in the period ended Nov. 4, the best reading since April, from minus 34.7 the previous week.

The U.S. consumed 18.8 million barrels a day of oil in 2011, or 21 percent of the world’s total, according to BP Plc (BP/)’s Statistical Review of World Energy.

“The low is probably in for the fourth quarter and the buyers are sticking their toes in the water,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.

Greece’s bill on pension, wage and benefit cuts was approved with 153 votes in favor in the 300-seat Parliament early today, according to Athanasios Nakos, the acting speaker.

European Central Bank President Mario Draghi said today the economic outlook is worsening and the bank stands ready to activate its bond-purchase program if governments fulfill the necessary conditions.

U.S. Election

Crude dropped the most since Dec. 14 yesterday, after President Barack Obama, a Democrat, won re-election. Obama faces a battle with the Republican-controlled House of Representatives over about $607 billion of tax increases and federal spending cuts that are set to take effect automatically in January as part of last year’s debt negotiations.

“The market will be under pressure due to the looming budget debate and the European debt crisis,” McGillian said.

The Congressional Budget Office has said the American economy will contract by as much as 0.5 percent next year if Congress fails to stop the measures known collectively as the “fiscal cliff.”

“There was some conciliatory talk yesterday, which points to a budget deal,” Kilduff said. “They may want to get any pain out of the way early on in the term.”

Equities Drop

Oil pared gains as the Standard & Poor’s 500 Index fell 1.2 percent in New York. The euro dropped to $1.2717, the lowest level since Sept. 7. A weaker euro and stronger dollar reduce oil’s appeal as an investment alternative.

“There are still worries about what’s going on in Europe,” said Tom Pawlicki, director of market research at Chicago-based EOXLive.

Demand for crude from the Organization of Petroleum Exporting Countries will decline through to 2016 because of the weakening economic outlook and growing reliance on competing sources such as U.S. shale oil deposits and natural gas liquids, the group said today in its annual World Oil Outlook.

U.S. oil production rose to the highest level in almost 18 years last week as a shale drilling boom cut reliance on foreign fuel, the Energy Department said in a report yesterday.

Electronic trading volume on the Nymex was 508,813 contracts as of 4:07 p.m. Volume totaled 738,743 contracts yesterday, 41 percent above the three-month average. Open interest was 1.6 million.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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


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