Oil Heads for Third Weekly Gain on Obama Job Plan, Storm in Gulf of Mexico

By Ben Sharples and Ann Koh - Sep 9, 2011 11:42 AM GMT+0700

Oil headed for a third weekly gain as investors bet President Barack Obama’s proposed job-creation plan will support demand for fuel and as producers in the Gulf of Mexico evacuated workers ahead of Tropical Storm Nate.

West Texas Intermediate futures climbed as much as 0.5 percent, erasing a decline of 0.8 percent, after Obama asked Congress to pass a proposal to inject $447 billion into the economy of the world’s biggest oil user. Prices slid yesterday after Federal Reserve chairman Ben S. Bernanke said the nation’s recovery is fragile. Energy companies including BP Plc began evacuating platforms in the Gulf of Mexico, home to 27 percent of U.S. oil output.

“In the next month or so, it’s going to be very uncertain,” said Jeremy Friesen, a Hong Kong-based commodity strategist at Societe Generale SA. “We could see prices continuing to sell-off if the market doesn’t like what the Fed says. But if the market likes that, the physical crude market is reasonably tight, so that should support prices.”

Oil for October delivery gained as much as 45 cents to $89.50 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.21 at 12:11 p.m. Singapore time. Prices are 3.2 percent higher this week and up 20 percent the past year.

Brent oil for October settlement increased as much as 45 cents, or 0.4 percent, to $115 a barrel on the London-based ICE Futures Europe Exchange. The European benchmark contract was at a premium of $25.59 to U.S. futures, compared with the record settlement of $26.87 on Sept. 6.

Nate, Stockpiles

Tropical Storm Nate’s top winds are 70 miles (113 kilometers) per hour, just under the threshold of 74 mph needed to be a hurricane, according to an advisory from the U.S. National Hurricane Center before 11 p.m. East Coast time yesterday. The storm has been lashing Petroleos Mexicanos rigs in the Bay of Campeche and its final track is still in question.

BP and Apache Corp. said they were beginning evacuations of some workers in the Gulf because of Nate. The BP decision affects non-essential workers at the Atlantis, Holstein and Mad Dog platforms, according to a message on a telephone hotline. Apache’s removal of non-essential workers from facilities in the far western Gulf hasn’t affected production, Bill Mintz, a company spokesman, said in an e-mail.

U.S. crude supplies fell 3.96 million barrels to 353.1 million last week as Tropical Storm Lee shut platforms, a report from the Energy Department showed yesterday. They were forecast to drop 2 million barrels, according to the median estimate of 14 analysts surveyed by Bloomberg News. Gasoline stockpiles climbed 199,000 barrels, compared with a median forecast for a drop of 1.4 million barrels.

Global Growth

Oil in New York slid yesterday after Bernanke said Fed policy makers will discuss tools to boost the economic recovery at their next meeting this month. Obama, speaking before a joint session of Congress, demanded that lawmakers act on a plan that would boost spending, stem layoffs and cut taxes.

“The price rise you’ve seen in WTI relates more to Obama’s speech than the weather,” said Friesen. The energy department report “was fairly supportive for crude,” he said.

The Organization for Economic Cooperation and Development cut growth forecasts yesterday for the U.S. and Japan, the largest and third-largest oil-consuming countries. China is the second-biggest user of crude.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net