Crude Oil Extends Rebound From 21-Month Low as Stocks Advance

By Mark Shenk

Nov. 14 (Bloomberg) -- Crude oil rose more than $1 a barrel in New York, extending its rebound from the 21-month low touched yesterday, as equities advanced and amid speculation a 10 percent drop in prices the previous two days wasn't justified.

``A combination of a relief rally and bargain hunting are helping push the market higher,'' said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. After dipping below $55 a barrel, ``the prices were too compelling to bargain hunters.''

Futures touched $54.67 yesterday, the lowest since Jan. 30, 2007, when the International Energy Agency slashed its 2009 oil-demand forecast by the most in 12 years amid deteriorating global economic growth. OPEC plans to meet in Cairo at the end of the month to discuss a further production cut.

Crude oil for December delivery rose $1.66, or 2.85 percent, to $59.90 a barrel at 10:31 a.m. Sydney time. on the New York Mercantile Exchange. Prices have tumbled 60 percent since reaching a record $147.27 on July 11. Yesterday, they gained $2.08, or 3.7 percent, to $58.24 a barrel.

U.S. stocks climbed, with the Dow Jones Industrial Average rising 552.59, or 6.7 percent, to 8,835.25, after tumbling as much as 317.24 points earlier yesterday. The Standard & Poor's 500 Index increased 58.99 points, or 6.9 percent, to 911.29.

``The stock market has firmed up, which is giving the energy market some strength,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``It's clear that an awful lot of bearish news has already been priced in.''

U.S. Stockpiles

U.S. crude-oil stockpiles rose 22,000 barrels to 311.9 million barrels last week, the Energy Department said yesterday. Inventories were forecast to climb 1 million barrels, according to the median of 13 responses in a Bloomberg News survey.

The Organization of Arab Petroleum Exporting Countries is scheduled to meet in Cairo on Nov. 29. Non-Arab members of the Organization of Petroleum Exporting Countries, such as Venezuela, Iran and Angola, will be invited to take part in talks about the oil market afterwards, OPEC President Chakib Khelil told Algerian radio yesterday.

OPEC decided at a meeting in Vienna last month to cut the production target for 11 of the group's members by 1.5 million barrels a day, from 28.8 million barrels a day.

Brent crude oil for January settlement rose $1.72, or 3.2 percent, to $56.24 a barrel yesterday on London's ICE Futures Europe exchange. The December futures contract expired yesterday after falling 38 cents, or 0.7 percent, to $51.99 a barrel. It touched $50.60 a barrel in intraday trading yesterday, the lowest since May 31, 2005.

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