Oil Is Steady as Economic Optimism Tempers Stockpile Concern

By Grant Smith

Oct. 29 (Bloomberg) -- Oil traded little changed after falling on a report that showed U.S. crude and gasoline inventories expanded last week.

Crude stabilized today before data from the U.S. Commerce Department forecast to show that the world’s largest economy grew in the third quarter for the first time in more than a year. Oil fell the most in a month yesterday after the Energy Department said that U.S. gasoline stockpiles climbed by 1.62 million barrels, more than expected.

“Eighty dollars has proven to be a real stumbling block for crude oil,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “We’re going to need a more definite increase in demand in order to push prices through that level. Currencies, equities and other commodities will be pointers in the meantime.”

Crude oil for December traded up 30 cents at $77.76 barrel in electronic trading on the New York Mercantile Exchange at 9:32 a.m. London time. Yesterday, the contract dropped $2.09, or 2.6 percent, to $77.46, the lowest settlement since Oct. 14. Prices have gained 73 percent this year.

The world’s largest economy expanded at a 3.2 percent annual pace from July through September after shrinking in the previous four quarters, according to the median estimate of 79 economists surveyed by Bloomberg News. The Commerce Department’s report on gross domestic product is due at 8:30 a.m. in Washington.

‘Overdue Correction’

“After several weeks of heady gains in a number of markets, we are finally seeing a long overdue correction set in,” said Edward Meir, senior analyst with MF Global Ltd. in Connecticut. “We may get one more leg lower in commodities, particularly if the U.S. GDP figures surprise to the upside.

“This scenario will surely boost the dollar yet again,” Meir said, “as it will likely convey the message towards tighter money and higher rates may soon begin.”

A stronger U.S. currency often diminishes investors’ demand for dollar-priced assets used to hedge against inflation, such as gold and crude.

Inventories of crude oil rose 778,000 barrels to 339.9 million in the week ended Oct. 23, the Energy Department report showed yesterday. A 1 million-barrel drop was forecast, according to a Bloomberg News survey.

Supplies of distillate fuel, a category that includes heating oil and diesel, declined 2.13 million barrels to 167.8 million. Inventories were 29 percent higher than the five-year average for the week, the department said.

Fuel demand dropped 0.8 percent to an average of 18.5 million barrels a day last week, the report showed. Imports of crude oil increased 2.2 percent to 8.89 million barrels a day last week, the report showed. Fuel imports climbed 6.3 percent to 2.54 million barrels a day.

Brent crude oil for December traded up 38 cents at $76.24 a barrel on the ICE Futures exchange at 9:33 a.m. London time. Prices dropped $2.06, or 2.6 percent, to end the session at $75.86 a barrel yesterday.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net