Crude Oil Rises as U.S. Stock Futures, Asian Equities Rebound

By Christian Schmollinger and Nesa Subrahmaniyan

Oct. 28 (Bloomberg) -- Crude oil rose from a 17-month low in New York as U.S. stock futures and Asian equity markets rebounded and on signs that the recent price decline was too far, too fast.

The MSCI Asia Pacific Index added 2 percent to 76.71 as of 2:40 p.m. in Tokyo, erasing earlier losses of 2.8 percent. The measure slumped 19 percent the in previous four days, closing yesterday at the lowest since August 2003. Futures on the Standard & Poor's 500 Index gained 1.4 percent.

``As the stock market becomes a bit stronger, some people start to think that bad economic news may be going away,'' said Hirofumi Kawachi, a senior energy analyst at Mizuho Investors Securities Ltd. in Tokyo. ``So people start to spend a bit of their risk money.''

Crude oil for December delivery climbed as much as $1.67, or 2.6 percent, to $64.89 a barrel on the New York Mercantile Exchange after falling as low as $61.75 earlier today. It was at $63.60 a barrel at 3:47 p.m. Singapore time.

Prices, which have tumbled 57 percent since reaching a record $147.27 on July 11, are down 32 percent from a year ago. Yesterday, futures dropped 93 cents, or 1.4 percent, to close at $63.22 a barrel, the lowest settlement price since May 29, 2007.

Oil was also supported by potential supply disruptions to the U.S. from Mexico. Petroleos Mexicanos, the third-largest supplier of crude to the U.S., closed two of its oil export terminals in the Gulf of Mexico because of heavy rains and wind.

The terminals at the ports of Pajaritos and Dos Bocas shut at 4 p.m. yesterday, according to a weather bulletin on the Web site of Mexico's Merchant Marine.

Stocks as Proxy

Brent crude oil for December settlement gained as much as $1.48, or 2.4 percent, to $62.89 a barrel on London's ICE Futures Europe exchange. It earlier fell as much as $1.31, or 2.1 percent, to $60.10 a barrel. The contract was at $61.44 a barrel at 3:53 p.m. Singapore time.

``The stock markets are acting as a proxy for the demand outlook on the whole,'' said Toby Hassall, an analyst at Commodity Warrants Australia in Sydney.

Oil is heading for a 38 percent drop this month, the steepest since at least 1986 in New York, even after the Organization of Petroleum Exporting Countries cut oil production for the first time in almost two years. The 13 OPEC nations agreed to reduce supply by 1.5 million barrels a day starting November.

OPEC Production

OPEC may make an additional output cut if its Oct. 24 decision to lower production fails to bolster prices, said Mohammad Ali Khatibi, Iran's representative to the group, according to the country's state-run Mehr news agency.

``With this 1.5 million barrel cut that the market just laughed at, I wouldn't be surprised to see them come out with another million barrel cut in December,'' said Hudson Capital's Kornafel. ``Everyone is getting out of the market, so there is no attention being paid to long-term fundamentals.''

The OPEC price basket, an average of 11 crude-oil grades sold by the group, dropped to $57.57 a barrel on Oct. 24, the lowest since March 21, 2007.

The Energy Department will probably report tomorrow that U.S. supplies of crude oil, gasoline and distillate fuel, a category that includes heating oil and diesel, rose last week, a Bloomberg News survey showed.

To contact the reporters on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net.