By Ben Sharples - Sep 27, 2011 7:36 AM GMT+0700
Oil advanced for a second day in New York on speculation steps by Europe to tame its sovereign debt crisis will temper a slowdown in the region's economy and demand for raw materials.
Futures climbed as much as 1.6 percent as equities rallied. The European Central Bank may debate covered-bond purchases and interest rate cuts, a euro-region central bank official said. The European Union accounted for 16 percent of global oil demand last year, according to BP Plc’s annual Statistical Review of World Energy. U.S. crude stockpiles rose last week, an Energy Department report tomorrow may show.
“If there’s a credible plan that is good enough and certain enough to restore reasonable confidence to the world then a lot of things are going to look cheap at current prices and that probably includes oil,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney.
Crude for November delivery gained as much as $1.31 to $81.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $80.97 at 10:33 a.m. Sydney time. The contract yesterday rose 0.5 percent to $80.24. Oil has dropped 8.9 percent this month and 15 percent this quarter. Prices are down 11 percent this year.
Brent futures for November settlement gained 61 cents, or 0.6 percent, to $104.55 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $23.58 to U.S. futures, compared with a record $26.87 on Sept. 6, based on front-month settlement prices.
Oil Supplies
“Crude benchmarks were propped up by the rally in equity markets and a softer U.S. dollar,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “Uncertainty over Europe continued to be a drag on prices, but with most of the bad news already priced in, oil markets could stabilize after posting steep declines last week.”
The Standard & Poor’s 500 Index added 2.3 percent in New York. The Dollar Index fell and the euro weakened against 13 of 16 major peers yesterday.
U.S. crude stockpiles probably climbed 2.2 million barrels last week, according to the median of 11 analyst estimates in a Bloomberg News survey. Gasoline supplies rose 1 million barrels and inventories of distillate fuel, a category that includes heating oil and diesel, increased by 500,000 barrels.
Brent futures, the benchmark for more than half the world’s crude, have declined 7 percent this quarter. Saudi Arabia, the world’s biggest oil exporter, may cut production as Brent falls toward $90 a barrel next year because the government needs higher prices to fund its budget, HSBC Holdings Plc said yesterday.
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 in Singapore at akwiatkowsk2@bloomberg.net
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