Nov. 20 (Bloomberg) -- Crude oil rose in New York as investors bought commodities as a hedge against inflation on expectations the dollar will weaken as the global economy recovers.
Oil is also poised for a weekly gain as the Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year and predicted a further acceleration in 2011 as China powers a global recovery. The dollar has lost 6.8 percent against the euro this year.
“In my view, investors see crude at below $78 as a buying opportunity, no matter how much of a glut we’ve got, simply because people believe the long-term trend for the dollar is down,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore.
Crude oil for December delivery rose as much as 53 cents, or 0.7 percent, to $77.99 a barrel in electronic trading on the New York Mercantile Exchange. It was at $77.90 a barrel at 1:42 p.m. Singapore time. Yesterday, the contract fell $2.12, or 2.7 percent, to $77.46, the biggest decline since Nov. 12. Futures are poised to increase 2 percent this week.
The economy of the OECD’s 30 member countries will expand 1.9 percent next year and 2.5 percent in 2011, the Paris-based group said in a report yesterday. Output will contract 3.5 percent this year. The OECD, which advises members on economic policy, forecast 2010 growth of 0.7 percent in June.
“Parts of the economy are starting to pick up,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “Leading indicators are good, inventories are drawing. I am looking for a break through $80 pretty soon.”
Year End
Oil, which has risen 75 percent this year, fell yesterday as investors closed off positions before the end of the year. The Standard & Poor’s 500 Index declined 1.3 percent and the Dow Jones Industrial Average lost 0.9 percent in New York yesterday.
“Both oil and equities have done well and towards the end of the year, it may be a time for investors to lock in profit,” said Shum. “A retraction in oil prices and equities ought to take place. Both have come a long way this year despite weak fundamentals in oil and sustainability in economic recovery.”
U.S. refinery utilization rates fell for the third consecutive week to 79.4 percent last week, the Department of Energy said. U.S. supplies of crude oil fell 887,000 barrels to 336.8 million last week, according to an Energy Department report. Analysts surveyed by Bloomberg News forecast that inventories would gain 300,000 barrels.
“At this time, over the last five years, rates would be as low as 85 percent and as high as 93 percent,” Shum said. “Refineries are running at a low rate in the export markets, Korea, Taiwan, Singapore, and that indicates demand globally is still weak.”
Declines in crude oil may be limited on concern the dollar will weaken, Shum said. A weaker dollar boosts the appeal of commodities as an inflation hedge.
The dollar bought $1.4920 per euro from $1.4925, after earlier rising as high as $1.4882. It was poised for a 0.1 percent decline this week.
Nigerian Oil Minister Rilwanu Lukman said he doubted the Organization of Petroleum Exporting Countries would cut supply with prices at current levels. OPEC members generally prefer to have higher quotas, he told reporters in London yesterday. OPEC plans to meet in Angola in December to discuss production.
Brent crude for January settlement was at $78.07 a barrel, up 43 cents, at 1:30 p.m. Singapore time on the London-based ICE Futures Europe exchange. Prices fell $1.83, or 2.3 percent, to $77.64 a barrel yesterday. |
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