Crude Oil Rises a Third Day as Equities Spur Recovery Hopes

By Grant Smith and Yee Kai Pin

Oct. 12 (Bloomberg) -- Crude oil rose for a third day in tandem with European equities amid increasing signs that the global economy is emerging from recession.

Oil touched a three-week high earlier as Singapore, Southeast Asia’s fourth-largest economy, raised its 2009 economic forecast. European stocks advanced, following the surge of U.S. equity markets on Oct. 9 to their highest in a year.

“The continued strength of equities when many people had been expecting a relapse is behind oil’s surge through $70,” said Christopher Bellew, senior broker at Bache Commodities Ltd. “Demand does seem to be on the mend, particularly in Asia.”

Crude oil for November delivery climbed as much as 81 cents, or 1.1 percent, to $72.58 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $72.38 as of 9:20 a.m. London time. Futures have gained 63 percent this year. Japan and the U.S. are closed for public holidays and there will be no Nymex floor trading today.

Oil rose to $71.77 a barrel on Oct. 9, the highest settlement since Sept. 18, after the International Energy Agency raised its 2010 demand forecast for a third month, citing higher-than-expected consumption in Asia and the Americas.

Prices rose for a second week as the Standard & Poor’s 500 Index rallied and the Dollar Index slipped to a one-year low, bolstering the investment appeal of commodities including gold.

“We are looking at an international economy that is going to be stronger in 12 months’ time,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “There’s that conviction that things are going to be better down the track,” even when some data is not “especially supportive,” he said.

‘Suitable’ Price

Oil has traded about $5 on either side of $70 a barrel since August as traders weigh the prospects for a rebound in demand against concern ample supply will put pressure on prices.

“What’s going to limit any further pricing gains for oil is inventories,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The extended weather forecasts for this winter coming out of both the U.S. and Japan were for a mild winter, so it’s likely the distillates inventories may portend some trouble ahead for oil.”

U.S. stockpiles of distillate fuel, including heating oil and diesel, have climbed to their highest since January 1983, according to Energy Department data. Gasoline inventories jumped by 2.94 million barrels to 214.4 million as refiners boosted output, the department said Oct. 7.

Drag of Distillates

“Gasoline demand seems to have steadied, but the distillate demand still seems very weak,” Moore said. “It draws into question just how the U.S. economy is really going.”

Hedge-fund managers and other large speculators increased their net-long position in Nymex oil futures in the week ended Oct. 6, according to the U.S. Commodity Futures Trading Commission. Speculative long positions, or bets prices will rise, outnumbered short positions by 50,006 contracts, the Washington-based commission said in its Commitments of Traders report.

Brent crude oil for November settlement rose as much as 80 cents, or 1.1 percent, to $70.80 a barrel on the London-based ICE Futures Europe exchange. It was at $70.63 a barrel at 9:20 a.m. in London. The contract gained 0.3 percent to $70 a barrel Oct. 9, the highest settlement since Sept. 22.

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net