Crude Oil Rises, Poised for Weekly Gain, on Signs of Recovery

By Yee Kai Pin and Ben Sharples

Nov. 6 (Bloomberg) -- Crude oil rose in New York, poised for a weekly gain, on optimism fuel demand will increase amid improved prospects for an economic recovery in the U.S., the world’s biggest energy consumer.

Oil rebounded from last week’s 4.4 percent decline after U.S. crude oil stockpiles unexpectedly fell, an Energy Department report showed this week. Futures also rose as Asian stocks followed U.S. equities higher and the dollar traded near a one-week low against the euro.

“Yesterday’s big gain in the stock market was a very good signal,” said Ken Hasegawa, a commodity derivatives sales manager at brokers Newedge in Tokyo. “Everyone understands commodities shouldn’t be different from stocks” as an indicator of the economy and demand, he said.

Crude oil for December delivery rose as much as 55 cents, or 0.7 percent, to $80.17 a barrel in electronic trading on the New York Mercantile Exchange. It was at $79.95 a barrel at 3:45 p.m. Singapore time. Yesterday, the contract slipped 78 cents to settle at $79.62 a barrel. Futures, up 80 percent in 2009, have gained 4 percent this week.

The Standard & Poor’s 500 Index added 1.9 percent in New York yesterday. The Dow Jones Industrial Average increased 2.1 percent to close above 10,000 for the first time since Oct. 22. Asian shares also rose, with the MSCI Asia Pacific Index up 1.1 percent at 4:46 p.m. in Tokyo, trimming its loss for the week.

“If you look at the trend over the past eight months, we’re certainly in a recovery phase,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “There are forecasts out there for $85 to $90 by year’s end, which I would say aren’t too far off the mark.”

Unemployment Rate

Oil declined 1 percent yesterday on concern that the Labor Department will say the U.S. unemployment rate rose to a 26-year high in October. An additional 175,000 jobs were probably lost in October, pushing unemployment to 9.9 percent, economists forecast before the Labor Department payrolls report due at 8:30 a.m. today in Washington.

“There has been some concern over the labor market and what that means for the consumer sector,” Hassall said. “The market is still looking for indications that the economy as a whole is improving.”

The dollar was little changed against the euro at $1.4877 at 7:50 a.m. in London. Yesterday it touched $1.4917, the weakest level since Oct. 27. The dollar’s decline bolsters the appeal of commodities as an alternative investment.

U.S. crude oil stockpiles fell 3.94 million barrels last week, more than reversing inventory gains made over the previous three weeks, the Energy Department said Nov. 4. An increase of 1.5 million barrels was forecast, according to the median estimate in a Bloomberg News survey of analysts.

Price Survey

Oil analysts and traders were split over whether crude oil prices will rise or fall next week, as investors focus on a weak dollar and ample product stockpiles.

Fourteen of 35 respondents polled by Bloomberg News, or 40 percent, said futures will drop through Nov. 13. Fourteen more predicted that oil will rise, while seven said prices may be little changed. Last week, 44 percent of survey respondents said the market would fall.

Brent crude oil for December settlement rose as much as 69 cents, or 0.9 percent, to $78.68 a barrel on the London-based ICE Futures Europe exchange. The contract was at $78.60 a barrel at 3:51 p.m. in Singapore.

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