Oil Rises on Speculation Bailouts to Shore Up Global Economy

Dec. 15 (Bloomberg) -- Crude oil rose in New York on speculation state support for heavy industry and banks may help slow the decline in global economic growth and maintain demand for fuel and energy.

Canada is considering financial support for its foresters and miners and will contribute to any rescue package the U.S. offers North American automakers, Industry Minister Tony Clement said yesterday. Ireland may invest as much as $13.4 billion in its banks, while the U.K. is considering loans and guarantees to aid its carmakers, the Sunday Times reported.

Car-making “is a fairly key sector for the U.S. economy,” said Toby Hassall, research analyst with Commodity Warrants Australia Pty in Sydney. “I do expect a rescue package in some form to go through quite soon.”

Crude oil for January delivery rose as much as $1.13 cents, or 2.4 percent, to $47.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $47.12 at 8:18 a.m. in Singapore.

The contract fell $1.70, or 3.5 percent, to $46.28 on Dec. 12 after the U.S. Senate rejected a proposed $14 billion rescue package for the nation’s automakers. Prices fell as much as 9.7 percent before recovering after the Bush administration said it may tap the nation’s $700 billion bank-bailout fund to provide carmakers some short-term relief.

“I am optimistic” the U.S. will provide a rescue package, Canada’s Clement said on CTV yesterday. “The Bush administration has made it pretty clear that they think a rescue is necessary to save the entire industry.”

Production, Confidence

A report today will probably show industrial production in the U.S., the world’s largest oil consumer, contracted 0.9 percent last month as automakers cut output, according to a survey of economists. Sentiment among the largest manufacturers in Japan, the third-largest oil user, fell the most in 34 years according to the nation’s quarterly Tankan survey today.

“The whole macro picture is key,” Commodity Warrants’ Hassall said.

Brent oil for January settlement was up 84 cents, up 1.8 percnet, to $47.25 on London’s ICE Futures Europe exchange. The contract, which expires tomorrow, fell 98 cents, or 2.1 percent, to $46.41 on Dec. 12. The more actively traded February contract rose 1.3 percent to $49.72. It fell 1.9 percent to $49.08 on Dec. 12.

New York futures are down 68 percent from the July 11 record of $147.27 and touched a four-year low of $40.50 on Dec. 5.

Prices rose 13 percent last week as talks on the U.S. auto- rescue progressed and Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, said it is already cutting production.

Deeper Cut Needed

Oil prices will fall further if OPEC nations don’t cut daily output by at least 1.5 million barrels this week, Iranian Oil Minister Gholamhossein Nozari said yesterday. Ministers meet in Oran, Algeria, on Dec. 17.

“There is fairly strong support” for oil around current levels, Commodity Warrants’ Hassall said. “OPEC is going to make a supply-side response quite soon” while government stimulus packages will also start being felt, he said.

The global slump may reduce daily oil use to 85.8 million barrels in 2008, the first decline since 1983, the International Energy Agency said Dec. 11. A forecast 0.5 percent increase in fuel use next year may be wiped out if the recession deepens, the Paris-based agency said.