Crude Oil, Metals Rise as China Unveils Growth Support Package

By Alexander Kwiatkowski and Grant Smith

Nov. 10 (Bloomberg) -- Crude oil and copper rose more than 5 percent after China announced a 4 trillion-yuan ($586 billion) stimulus package that may spur economic growth and demand for raw materials.

China, the world's second-largest oil consumer, said yesterday it will spend the money through 2010 on housing and infrastructure, boosting demand for iron ore, crude oil and copper. Oil also gained after Saudi Aramco, the world's biggest state oil company, told South Korean and Japanese refiners it would cut December supplies.

``The market is bouncing back this morning as last week's tremendous sell-off starts to look a little bit extreme, and as some of the demand-side gloom is dispelled by the Chinese stimulus package,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``The technical outlook for oil prices suggests that the downward price move may resume soon.''

Crude oil for December delivery climbed as much as $3.37, or 5.5 percent, to $64.41 a barrel in electronic trading on the New York Mercantile Exchange. It was at $64.20 at 11:04 a.m. London time.

Prices fell 10 percent last week as equities dropped, U.S. fuel stockpiles rose more than expected and the nation's unemployment rate climbed to a 14-year high.

Commodities Surge

China's economy grew 9 percent in the third quarter at the slowest pace in five years and export orders dropped to the lowest level since 2005.

Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows among their economies, Russian Finance Minister Alexei Kudrin said in an interview yesterday.

Russia, the world's second-biggest oil producer, will also defy calls from Venezuelan President Hugo Chavez to join the Organization of Petroleum Exporting Countries in cutting output, Kudrin said.

Copper for delivery in three months gained $340, or 9.1 percent, to $4,095 a metric ton on the London Metal Exchange as of 11:31 a.m. local time, reversing last week's decline.

Bullion for immediate delivery advanced as much as $18.40, or 2.5 percent, to $755.05 an ounce and traded at $753.56 at 11:21 a.m. London time.

Corn for December delivery gained as much as 14.5 cents, or 3.9 percent, to $3.90 a bushel in electronic trading in Chicago and was at $385.75 a bushel at 11:15 a.m. London time.

Lasting Effect?

China will spend the equivalent of almost a fifth of its gross domestic product last year on infrastructure and encourage investments in machinery.

``The market believes it is positive, but I doubt it will have a lasting effect,'' said Bayram Dincer, a commodity research analyst at Dresdner Bank. The reaction ``might be a little bit unjustified.''

The International Monetary Fund is forecasting that the economies of the U.S., Japan, Europe and the U.K. will all contract next year in their first simultaneous recession since the Second World War.

Saudi Aramco, the world's biggest state oil company, will cut crude supplies in December to customers in Japan by about 5 percent to 6 percent below levels agreed to in annual contracts, a refinery official said.

The Dhahran, Saudi Arabia-based producer will reduce mostly supplies of its heavy crude, said the refinery official who had received notices from the company and asked not to be identified because of confidentiality agreements.

Brent crude oil for December settlement gained as much as $3.64, or 6.4 percent, to $60.99 a barrel on London's ICE Futures Europe exchange. The contract was at $60.85 at 11:07 a.m. local time.

To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net