Crude Oil Poised for Fourth Week of Gains on Economic Recovery

By Ben Sharples

Oct. 23 (Bloomberg) -- Crude oil traded above $81 a barrel in New York, poised for a fourth week of gains, on improved prospects for an economic recovery in the U.S., the world’s biggest energy consumer.

Oil has advanced 3.3 percent this week as U.S. equities gained on better-than-estimated company earnings, boosting speculation that the worst recession since the 1930s is over. Prices also increased as the dollar declined against the euro, adding to the appeal of commodities as an alternative investment.

“It has been led by the equity markets,” said Mark Pervan, a senior commodity strategist at ANZ Banking Group Ltd. in Melbourne. Better-than-expected earnings “continue to flag recovering U.S. demand and it puts further downward pressure on the dollar as a lower requirement for risk aversion.”

Crude oil for December delivery traded at $81.15 a barrel, down 4 cents, in electronic trading on the New York Mercantile Exchange at 9:34 a.m. Singapore time. Yesterday, the contract fell 18 cents to settle at $81.19. Prices have climbed 82 percent this year.

The MSCI Asia Pacific Index rose 0.5 percent to 119.79 as of 9:26 a.m. in Tokyo as earnings reports from Australia to Japan boosted speculation that rising demand will help the global economy exit from recession.

U.S. stocks also advanced for the first time in three days yesterday. The Standard & Poor’s 500 Index gained 1.1 percent, recouping more than half of its retreat over the previous two days. The Dow Jones Industrial Average rose 1.3 percent.

“As we enter the tail-end of the U.S. reporting season, you can look back and say that the report card was better than expected,” Pervan said.

Weaker Dollar

The dollar traded at $1.5033 per euro at 10:22 a.m. in Tokyo, unchanged from yesterday in New York. It earlier reached $1.5060, the weakest since August 2008.

Oil dropped 0.2 percent yesterday on speculation the Organization of Petroleum Exporting Countries members will agree to increase production at a December meeting. OPEC may raise output to keep oil in a range of $75 to $80 a barrel, Secretary- General, Abdalla El-Badri said in London. The 12-member group last agreed to increase targets in September 2007.

An increase in OPEC’s production will depend on prices remaining at $75 to $80 a barrel, as well as on stockpiles returning to the five-year average and the elimination of floating storage, El-Badri told reporters in London.

The 12-member group will meet on Dec. 22 in Luanda, Angola, to review output targets.

OPEC accounts for about 40 percent of the world’s oil production. OPEC members agreed in September 2008 that the 11 countries with quotas would trim output by 4.2 million barrels a day to 24.845 million. Iraq is exempt from the quota system.

Brent crude oil for December settlement traded at $79.54 a barrel, up 3 cents, on the London-based ICE Futures Europe exchange at 9:32 a.m. Singapore time. Yesterday, the contract declined 18 cents to settle at $79.51.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net