By Ben Sharples - Aug 23, 2011 1:35 PM GMT+0700
Oil advanced for a second day in New York as investors bet U.S. fuel demand may rebound and a recovery in Libyan crude output will take longer than expected.
Futures climbed as much as 1.2 percent before a government report tomorrow that may show U.S. gasoline inventories shrank last week while crude stockpiles rose. Prices also gained after a manufacturing gauge improved in China, the world’s biggest energy user. London-traded Brent rebounded, after dropping as much as 3.2 percent yesterday as Libyan rebels entered Tripoli.
“The market got a little ahead of itself in terms of thinking that the Libyan conflict might be all over in a week,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who predicts New York crude will average $115 a barrel this year. For West Texas Intermediate, the main grade traded in New York, “it still obviously has a focus on what’s happening in the U.S. in terms of petroleum demand.”
Crude for October delivery climbed as much as 99 cents to $85.41 a barrel in electronic trading on the New York Mercantile Exchange, and was at $85.32 at 2:32 p.m. Singapore time. The contract earlier fell as much as 0.4 percent. It gained 2.4 percent yesterday.
Brent oil for October settlement was at $109 a barrel, up 64 cents, on the London-based ICE Futures Europe exchange, after closing 0.2 percent lower yesterday. The European benchmark contract was at a premium of $23.63 to U.S. West Texas Intermediate crude futures compared with a record of $26.21 on Aug. 19.
Fuel Supplies
An Energy Department report tomorrow may show gasoline stockpiles declined 1 million barrels from 210 million barrels in the seven days ended Aug. 19, according to a Bloomberg News survey of analysts. Crude inventories probably increased a second week by 1.5 million barrels, the survey shows. The industry-funded American Petroleum Institute will report its own data today.
“Energy prices are expected to hold in a mixed direction today before tomorrow’s data potentially offer some support,” Tom Pawlicki, a Chicago-based analyst at MF Global Holdings Ltd., said in a note. “The question for Brent crude, as well as the Brent-WTI spread, will be exactly when Libyan oil output is restored and to what capacity.”
Libya Revolt
Brent dropped yesterday, narrowing its record premium above U.S. futures by the most in five weeks amid speculation that an end to Muammar Qaddafi’s rule will lead to a recovery in the nation’s crude production. Rebel fighters hunted for the leader and declared his regime over as the dictator’s forces kept up their fight in parts of Tripoli, the capital now mostly in rebel hands.
The Libyan revolt, which began in February, has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 100,000 barrels a day last month, a Bloomberg News survey showed. That’s less than 10 percent of the 1.6 million barrels the nation pumped in January, before the uprising.
Repairing damaged infrastructure and well heads at oil fields will take “several months and perhaps longer than a year,” Barclays Plc’s analysts, Helima Croft and Amrita Sen, said in a report e-mailed today. “Indeed, while the advancement of the rebels into Tripoli may have raised the specter of a speedy reincorporation of Libyan oil into the world market, we remain doubtful whether this will occur.”
It may take until 2012 before oil exports resume if the government falls, Emmanuel Fages, an energy analyst with Societe Generale SA in Paris, said yesterday. Goldman Sachs Group Inc. said resuming shut production will be “challenging,” according to an Aug. 22 report.
Front-month U.S. crude futures are 16 percent higher the past year. Prices also gained today amid speculation oil demand growth in China, the world’s second-biggest consumer, may accelerate. A preliminary reading of 49.8 for a manufacturing index released by HSBC Holdings Plc and Markit Economics today compares with a final reading of 49.3 for July.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
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