By Yee Kai Pin and Ben Sharples
Oct. 6 (Bloomberg) -- Crude oil traded above $70 a barrel in New York after rising on optimism fuel demand will increase amid improved prospects for a recovery in the U.S., the world’s biggest energy consumer.
Oil climbed to $71 yesterday as U.S. stocks gained after a report showed service industries returned to growth following 11 months of contraction. Commodities also rose as the dollar fell on a report Gulf states may switch to a basket of currencies to trade oil. The dollar’s decline bolstered the appeal of raw materials as a hedge against inflation.
“People are still on the backfoot wanting to buy and consume,” Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney, said in a Bloomberg Television interview. “The positive data we had out of the U.S. last night with the ISM non-manufacturing was another step to say that any dip really should be looked at.”
Crude oil for November delivery was at $70.55 a barrel, up 14 cents, in electronic trading on the New York Mercantile Exchange at 12:47 p.m. in Singapore. Yesterday, the contract gained 46 cents, or 0.7 percent, to settle at $70.41 a barrel. Prices have climbed 58 percent this year.
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the U.S. economy, rose to 50.9, higher than forecast, from 48.4 in August, according to the Tempe, Arizona-based group. Fifty is the dividing line between expansion and contraction.
“The major headline supporting the rally was the September ISM non-manufacturing report showing positive growth,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in a note. “Oil was pushed higher thanks to the 100-point move in the Dow Jones” Industrial Average, he said.
Asian Shares
Asian stocks rose for the first time in four days. The MSCI Asia Pacific Index added 1 percent to 114.89 as of 1:42 p.m. in Tokyo. Yesterday, the Standard & Poor’s 500 Index added 1.5 percent to 1,040.46 in New York, its steepest gain in a week. The Dow Jones Industrial Average advanced 112.08, or 1.2 percent, to 9,599.75.
The dollar fell to $1.4710 per euro at 12:38 p.m. in Tokyo, from $1.4648 yesterday in New York, after the U.K.-based Independent newspaper reported Arab states are seeking to move to a basket of currencies, including the yen, the yuan, the euro and gold to settle oil transactions. Commodities including gold and copper advanced.
“We’re seeing some tentative signs that consumption is picking back up,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “It continues to look like the recovery is on track.”
Oil Inventories
U.S. crude oil inventories probably rose last week as refineries performed seasonal maintenance, a Bloomberg News survey showed. Commercially held stockpiles increased 2 million barrels from 338.4 million in the week ended Oct. 2, according to the median of estimates from 11 analysts.
Distillate fuel inventories, which include heating oil and diesel, are expected to have declined 400,000 barrels, the survey showed. Stockpiles previous rose a sixth week to 171.1 million barrels, the highest since 1983.
The Energy Department is scheduled to release its Weekly Petroleum Status Report at 10:30 a.m. tomorrow in Washington. The industry-funded American Petroleum Institute will put out its own data today.
Brent crude oil for November settlement traded at $68.16 a barrel, up 12 cents, on the London-based ICE Futures Europe exchange at 12:46 p.m. Singapore time. Yesterday, the contract slipped 3 cents to settle at $68.04 a barrel.
To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net.
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