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Oil Trades Near Three-Week High as Investors Await Policy

11 Sep 2012

Oil traded near the highest level in almost three weeks in New York as investors waited to see if the U.S. will add stimulus to its economy, countering concern that Europe’s bailout plan will falter and derail the recovery.

Futures were little changed, paring an earlier decline. TheFederal Reserve starts a two-day meeting tomorrow where it may announce measures to boost the U.S. economy amid slowing jobs growth. Separately, a court ruling is due on Germany’s participation in the euro-area fund for fighting the region’s debt crisis. Goldman Sachs Group Inc. said West Texas Intermediate oil may rise to narrow the gap between the benchmark grade and other regional crudes.

“The market is waiting on the two big news events in the German court decision and whether or not the Fed does something,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “With oil we’re looking at a fairly gradual expansion in demand against a backdrop of fairly well-covered supply.”

Crude for October delivery was at $96.44 a barrel, down 10 cents, in electronic trading on the New York Mercantile Exchangeat 3:37 p.m. Singapore time. It earlier slid as much as 46 cents. The contract rose 12 cents to $96.54 yesterday, the highest close since Aug. 22. Prices are 2.4 percent lower this year.

Brent oil for October settlement fell 7 cents to $114.74 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was at $18.30, from $18.27 yesterday.

Technical Support

Brent, a benchmark grade for more than half of the world’s oil, has risen 29 percent since this year’s lowest close on June 21, as a European Union embargo on crude purchases from Irantook full effect on July 1. Global supply, demand and inventories of crude don’t justify the increase in prices, Saudi Arabian Oil Minister Ali al-Naimi said yesterday, according to the official Saudi Press Agency. The kingdom is the world’s largest crude exporter.

Oil in New York has technical support along the middle Bollinger Band on the daily chart, at around $94.30 a barrel today, according to data compiled by Bloomberg. Futures halted declines near this indicator in July and August. Buy orders tend to be clustered near chart-support levels.

Goldman Forecast

WTI may rise to about $107 a barrel to attract crude flows from Canada and the Bakken shale formation to Cushing, Oklahoma, the delivery point for New York-traded contracts, according to Goldman Sachs Group Inc. The benchmark grade may narrow its discount to other crudes as increased railway capacity reduces an oil glut in the U.S. Midwest, Goldman said in a report e-mailed today.

“We expect that Bakken and Canadian crude oil will need to continue to flow to Cushing in the fourth quarter 2012, and WTI prices will need to rise back above Canadian and Bakken prices in order to motivate these flows,” David Greely, a New York-based analyst at Goldman Sachs, said in the report.

Germany’s Federal Constitutional Court will tomorrow rule on the country’s participation in the European Stability Mechanism, a permanent 500 billion-euro ($638 billion) fund that offers loans to member states and may buy their bonds to cut borrowing costs. Germany will be the biggest contributor to the fund with a 27 percent share, a statement from the European Commission shows. The Netherlands holds elections the same day.

Fed Meeting

The U.S. Fed may announce a third round of asset purchases, or quantitative easing, after its meeting. The nation, the world’s biggest oil consumer, added 96,000 workers in August compared with 141,000 in July, Labor Department figures showed Sept. 7.

U.S. crude inventories probably dropped 2.63 million barrels last week, according to the median of eight analyst estimates in a Bloomberg News survey before an Energy Department report tomorrow. Gasoline supplies may have slipped 1.65 million barrels, the survey shows.

The industry-funded American Petroleum Institute will release separate stockpile data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.