Crude Oil Rises for a Second Day as Chinese Manufacturing Grows

By Grant Smith

Dec. 1 (Bloomberg) -- Crude oil rose for a second day after a report showed Chinese manufacturing expanded at the fastest pace in five years, spurring hopes that the world’s second- biggest oil user will buoy consumption of the fuel.

Oil advanced in tandem with equities, and as a weaker dollar enhanced the appeal of commodities for hedging inflation. The purchasing managers’ index for China, released today by HSBC Holdings Plc, rose to a seasonally adjusted 55.7 from 55.4. The government’s PMI, also released today, held at an 18-month high, aiding the rebound of the world’s third-largest economy.

“Chinese oil demand should increase by 5 percent this year, 4 percent next year,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “While the rate of growth is slowing down a bit, it means there is still growth there in one of the most important regions.”

Oil for January delivery gained as much as 66 cents, or 0.9 percent, to $77.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $77.81 a barrel at 9:55 a.m. London time.

Oil traded near $78 a barrel on Nov. 25 before Dubai World, one of the emirate’s three largest state-linked holding companies, sought to delay payments on its debt and other liabilities. The company has since begun what it described as “constructive” talks with banks to restructure $26 billion, less than half of its $59 billion in obligations.

‘China Busy’

“Dubai is being resolved and China is as busy as ever,” said Rob Montefusco, a broker at Sucden Financial in London. “The market is coming back quickly after finding support at $75.”

Iranian Oil Minister Masoud Mir-Kazemi said the Organization of Petroleum Exporting Countries won’t increase production targets when it meets later this month, Agence France-Presse reported.

The 12 OPEC states will assemble in Luanda, Angola, on Dec. 22 to review their output targets and the impact of supply reductions announced last year, the largest in the group’s history. Ministers from Kuwait and Nigeria have also indicated they expect quotas to be left unchanged.

Brent crude oil for January settlement on the London-based ICE Futures Europe exchange traded at $78.99 a barrel, up 52 cents, at 9:56 a.m. in London. Yesterday, the contract rose 1.7 percent to $78.47 barrel, the highest since Nov. 18.

The U.S. currency weakened to $1.507 per euro from $1.4976 yesterday, making dollar-priced assets such as crude appear less expensive to foreign investors, and more useful for hedging against inflation.

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