Oil Is Poised for Monthly Rise on Optimism Over U.S. Demand

By Yee Kai Pin and Ben Sharples

Oct. 30 (Bloomberg) -- Crude oil is poised for its biggest gain in five months after a report yesterday showed the U.S. economy grew in the third quarter, ending a year-long contraction and spurring optimism fuel demand will increase.

Oil rose 3.1 percent yesterday, the most in two weeks, after the Commerce Department said the world’s largest energy- consuming country expanded at a 3.5 percent annual pace between July to September. Gross domestic product was forecast to grow 3.2 percent, according to a Bloomberg News survey.

“It’s a very good number although it’s helped by stimulus from the government,” said Ken Hasegawa, a commodity derivatives sales manager at brokers Newedge in Tokyo. “We have to watch carefully the fourth quarter and the first quarter.”

Crude oil for December delivery traded at $79.52 a barrel, down 35 cents in electronic trading on the New York Mercantile Exchange at 4:22 p.m. Singapore time. Yesterday, the contract rose $2.41 to $79.87 a barrel. Futures, up 78 percent so far this year, are set to gain 13 percent in October, the biggest monthly rise since a 30 percent rally in May.

The dollar was little changed after falling yesterday against the euro. It traded at $1.4823 at 2:08 p.m. in Tokyo, from $1.4822 in New York. A declining U.S. currency spurs demand for commodities, including gold, as an alternative investment.

“There was a whole string of positive economic news from Europe, Japan, to the U.S., and the dollar was down,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Last night was a strong night for commodities across the board.”

Equities Advance

Asian stocks advanced, paring the MSCI Asia Pacific Index’s first monthly decline since February, and European stock futures were little changed. Yesterday, U.S. equities rallied on the return of economic growth. The Standard & Poor’s 500 Index climbed 2.3 percent to 1,066.11 in New York and the Dow Jones Industrial Average increased 2.1 percent to 9,962.58.

The U.S. economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four quarterly decreases marked the longest stretch of declines since quarterly records began in 1947.

“The GDP numbers really came out of the gate,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Growth is there, four quarters of negative growth are well and truly out of our way.”

The number of Americans collecting unemployment insurance fell more than forecast to the lowest level in seven months, a government report yesterday showed. Continuing claims for jobless benefits were down 148,000 at 5.8 million in the week ended Oct. 17, the lowest level since March 21 and biggest weekly drop since July, according to the Labor Department.

Price Survey

Crude oil may fall next week on speculation the dollar will rebound against the euro and equities may pull back, according to a Bloomberg News survey.

Fifteen of 34 analysts and traders, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast prices will be little changed. Last week, 50 percent of survey respondents said oil would fall.

Brent crude for December settlement traded at $77.53 a barrel on the London-based ICE Futures Europe exchange, slipping 51 cents at 4:22 p.m. in Singapore. Yesterday, the contract settled at $78.04 a barrel, up $2.18, or 2.9 percent, the most since Oct. 21.

To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net.