West Texas Intermediate crude advanced after economic growth accelerated in China, the world’s largest oil-importing country, and on speculation the U.S. will maintain economic stimulus.
Futures rose from a three-month low after China’s gross domestic product expanded 7.8 percent in the July-through-September period from a year earlier, halting a two-quarter slowdown. Federal Reserve Bank of Chicago President Charles Evans said yesterday that the U.S. shouldn’t curb stimulus after a 16-day government shutdown. The U.S. is the second-biggest oil importer, according to the Energy Information Administration.
“The market is getting some support from the Chinese economic data and on expectations that the Fed will delay reducing its asset purchases after the recent budget wrangling,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
WTI crude for November delivery rose 14 cents to settle at $100.81 a barrel on the New York Mercantile Exchange. The contract fell 1.6 percent to $100.67 yesterday, the lowest close since July 2. Prices slipped 1.2 percent this week. The volume of all futures traded was 16 percent below the 100-day average at 3:51 p.m.
Brent for December settlement advanced 83 cents, or 0.8 percent, to end the session at $109.94 a barrel on the London-based ICE Futures Europe exchange. Volume was 26 percent lower than the 100-day average. The European benchmark crude traded at an $8.83 premium to WTI for the same month.
Prices slipped earlier this week on speculation that U.S. lawmakers would fail to reach a debt agreement. After last-minute negotiations, President Barack Obama signed a bill yesterday to reopen the government through Jan. 15 and extend its borrowing authority to Feb. 7.
“There’s nothing to be too excited about,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “The can’s been kicked down the road for a few months and we will have to deal with the same issues early next year.”
In China, industrial production increased by 10.2 percent in September from a year earlier, the statistics bureau report showed, matching the median forecast of 48 economists. The Asian nation accounts for about 11 percent of global oil demand this year, compared with 21 percent for the U.S., the largest consumer, according to the International Energy Agency.
“There were concerns about whether the Chinese recovery is sustainable, and there are plenty of concerns still, but nonetheless these numbers are positive and supporting oil prices today,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.
The industry-funded American Petroleum Industry reported Oct. 16 that U.S. crude inventories gained 5.94 million barrels last week. The U.S. government will release inventory data for the week ended Oct. 11 on at 10:30 a.m. Washington time on Oct. 21, according to the EIA. The figures are delayed because of the government shutdown.
The EIA report will probably show that crude inventories rose by 2.75 million barrels to 373.3 million in the week ended Oct. 11, based on the median of eight analyst estimates in a Bloomberg survey. That would leave supplies at the highest level since July 5.
Refineries may have reduced their utilization rate to 85.5 percent last week, the lowest level since April, the survey showed. Units were idled for maintenance after the peak summer gasoline-demand season, which ended with the Labor Day holiday on Sept. 2.
“We have plenty of oil,” Hodge said. “There shouldn’t be much of a run-up in prices unless there are additional sparks in some of the world’s political hotspots.”
Goldman Sachs Group Inc. (GS:US) maintained its forecast for the Brent-WTI spread to shrink to $5 a barrel toward the end of this year. Oil markets have been “myopic” in reacting to stockpile changes at Cushing, Oklahoma, the delivery point for the U.S. benchmark grade, Jeffrey Currie, Goldman’s head of commodities research, said in an e-mailed report today. The storage hub is the delivery point for WTI futures.
Futures are trading near a technical indicator that supported prices from late April through June, according to data compiled by Bloomberg. On the weekly chart, WTI is above the middle Bollinger band at about $100.31 a barrel. Buy orders tend to be clustered close to chart-support levels.
Implied volatility for at-the-money WTI options expiring in December was 18.7 percent, down from 19.7 percent from yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 468,794 contracts as of 3:52 p.m. It totaled 873,513 contracts yesterday, the highest level since July 11 and 49 percent more than the three-month average. Open interest was 1.81 million contracts, the least since Aug. July 8.
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