Oil May Rise on Signs Rate Cuts Will Spur Demand, Survey Shows

By Mark Shenk

Oct. 31 (Bloomberg) -- Crude oil may rise next week on speculation that interest-rate cuts in the U.S. and China, the two biggest energy consuming countries, will bolster fuel demand.

Sixteen of 28 analysts surveyed by Bloomberg News, or 57 percent, said prices will increase through Nov. 7, the most bullish response since the week ended Aug. 15. Six respondents, or 21 percent, said oil will decline and six forecast little change. Last week 41 percent expected futures to decline.

Oil climbed more than $4 a barrel on Oct. 29, after the U.S. and China cut interest rates to spur economic growth. European Central Bank President Jean-Claude Trichet said this week that the bank may lower borrowing costs next month. Oil prices have tumbled since July on signs that the economic slowdown in the U.S. and Europe is spreading to emerging economies.

``There's the potential for a rally after the biggest sell- off in history,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``We've seen demand stabilize a little bit, a sign that the worst is over. We're also entering the fourth quarter when demand picks up as temperatures drop.''

U.S. fuel demand during the past four weeks averaged 18.9 million barrels a day, down 7.8 percent from a year ago, an Energy Department report showed Oct. 29. Demand in the four weeks ended Oct. 10 averaged 18.6 million barrels a day, down 9.9 percent from a year earlier and the lowest since July 1999.

Crude oil for December delivery rose $1.81, or 2.8 percent, to $65.96 a barrel so far this week on the New York Mercantile Exchange. Prices have dropped 55 percent from the record $147.27 a barrel reached on July 11.

The oil survey has correctly predicted the direction of futures 50 percent of the time since its start in April 2004.

     Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                   RISE      NEUTRAL    FALL
                    16          6        6

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