Crude Is Little Changed After Reaching One-Year High Above $79

By Grant Smith and Ann Koh

Oct. 19 (Bloomberg) -- Crude oil was little changed after reaching a one-year high as rising equity markets stoked confidence that energy consumption will rebound.

Oil advanced for an eighth day, its longest winning streak since July, as the dollar weakened against the euro, attracting investors seeking an inflation hedge to crude. U.S. supplies of distillates fuels such as diesel and heating oil fell from a 26- year high in the week ended Oct. 9, the Energy Department reported last week.

“Optimism from equities still seems to be channeling into the oil market,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “There has been an increase in petrol demand, the macro figures have been coming out okay, and the colder winter should help with heating demand.”

Crude oil for November delivery was at $78.70 a barrel, up 17 cents, in after-hours electronic trading on the New York Mercantile Exchange at 10 a.m. London time. Prices earlier rose as much as 52 cents, or 0.7 percent, to $79.05, the highest since Oct. 15, 2008.

The contract, expiring tomorrow, rose 1.2 percent to $78.53 a barrel on Oct. 16 after a report showed U.S. industrial production last month climbed more than economists forecast. The more widely held December contract was at $79.29 a barrel, up 27 cents.

Europe’s Dow Jones Stoxx 600 Index added 0.8 percent at 9:18 a.m. in London. The U.S. currency traded at $1.4926 against the euro, compared with $1.4828 earlier.

Last week, oil futures posted their biggest weekly gain in almost two months after the U.S. Energy Department said gasoline stockpiles fell by 5.2 million barrels.

U.S. Inventories

Oil prices have increased 23 percent in the past three months even as U.S. fuel stockpiles climbed. Prices rose as a recovery in equity markets emboldened investors, and the sliding U.S. dollar prompted buying of commodities.

U.S. distillates supplies, including diesel and heating oil, fell from a 26-year high in the week ended Oct. 9, the Energy Department reported last week. At 170.7 million barrels, they were 30 percent above the five-year average for the period.

“Inventory levels are still relatively high,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Ultimately we’ll see oil prices drifting lower again, maybe even under $70 a barrel, because the market is relatively well supplied.”

Brent crude oil for December settlement rose as much as 47 cents, or 0.6 percent, to $77.46 a barrel on the London-based ICE Futures Europe exchange, and was at $77.19 at 9:35 a.m. London time.

‘Bounce Back’

Reports from the U.S. Department of Energy have had mixed results for refined products, Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut, said in a note to clients. “If this week follows historical trends, we should see a bounce back up in both crude oil imports and in refinery utilization.”

Hedge-fund managers and other large speculators increased their bets on rising oil futures to a nine-month high last week, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 68,836 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 18,830 contracts, or 38 percent, from a week earlier.

“The market is pricing in a very big upturn in demand in order to draw down all that product, and I just think it’s a little optimistic at this point,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne.

To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net