Oil Trades Near a Three-Month High on U.S. Supply, European Crisis Outlook

Author: Spencer Ogden
Date posted08/Nov/2011
Author: Spencer Ogden

Oil rose to the highest price in more than three months in New York as signs of shrinking crude stockpiles in the U.S. countered concern that Europe will struggle to contain its debt crisis.

Futures advanced for a fifth day, gaining as much as 0.8 percent. Crude supplies at Cushing, Oklahoma, fell 4.4 percent in the first three days of the month, data from DigitalGlobe Inc. showed. Prices also gained amid speculation Iran’s nuclear plans may threaten Middle East stability. Greek Prime MinisterGeorge Papandreou will resume talks today on forming a government, while Italy’s Silvio Berlusconi faces a vote that will determine if he has the support to stay in power.

“Italy is too big to save, and too big to fail, so whatever happens there will have an impact on sentiment across the board,” said Ole Hansen, senior manager of trading advisory at Saxo Bank A/S in Copenhagen. “Until we have additional news out of Italy on the economic side, it seems technically driven, and also with worries on the supply side.”

Crude for December delivery on the New York Mercantile Exchange rose as much as 79 cents to $96.31 a barrel, the highest price since Aug. 1, and was at $96.13 at 8:58 a.m. London time. Yesterday, the contract advanced $1.26, or 1.3 percent, to $95.52, the highest settlement since July 29. Prices have gained 5.2 percent this year.

Brent oil for December settlement on the London-based ICE Futures Europe exchange was up 89 cents at $115.45 a barrel. The premium of the European contract to New York crude was at $19.29 a barrel, after widening 7.5 percent yesterday, the most since Sept. 30. The spread settled at a record-high $27.88 on Oct. 14.

Cushing Supplies

Oil supplies held in floating-roof tanks at Cushing, the delivery point for New York-traded crude, dropped 1.32 million barrels to 28.3 million on Nov. 3, compared with Nov. 1, according to satellite images taken by Longmont, Colorado-based DigitalGlobe. An Energy Department report tomorrow may show total U.S. crude inventories climbed 250,000 barrels last week, according to the median estimate of 10 analysts surveyed by Bloomberg News. The industry-funded American Petroleum Institutewill release its own stockpile data today.

Crude in New York has technical support at about $94.90 a barrel, the 50 percent Fibonacci retracement of the price drop from the 2011 high in May to the October low, according to data compiled by Bloomberg. This level is also near the 200-day moving average that was surpassed at yesterday’s settlement. Buy orders tend to be clustered near chart-support levels.

Oil is being buoyed by expectations that a report this week may show International Atomic Energy Agency inspectors have concluded for the first time that Iran is working toward making nuclear weapons.

The report “has added a geopolitical risk premium to oil,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. Iran is the second-largest oil producer, behind Saudi Arabia, in the Organization of Petroleum Exporting Countries. The 12-member group pumps about 40 percent of the world’s crude.