Oil Trades Near a One-Year High on Economic Recovery Optimism

Oct. 20 (Bloomberg) -- Crude oil traded near a one-year high in New York after rising above $79 a barrel on optimism demand will increase amid improved prospects for an economic recovery in the U.S., the world’s biggest energy user.

Oil advanced 1.4 percent yesterday as U.S. stocks climbed on better-than-estimated earnings and speculation the economy is healthy enough for policy makers to unwind efforts to shore up the financial system. The dollar weakened, increasing the appeal of commodities as an alternative investment.

“The underlying factors are all still in play,” said Mike Sander, an investment adviser at Sander Capital in Seattle. “A robust economic outlook on the back of a weak dollar is helping to boost the stock market and in turn, both factors are supporting higher oil prices.”

Crude oil for November delivery was at $79.52 a barrel, down 9 cents, in electronic trading on the New York Mercantile Exchange at 8:58 a.m. Singapore time. Prices settled at $79.61 yesterday, the highest close since Oct. 13, 2008. The November contract expires today. The more actively traded December contract was at $79.86 a barrel, down 10 cents.

Prices have gained 24 percent in the past three months as a recovery in equity markets emboldened investors, and the sliding U.S. dollar prompted buying of commodities. The dollar traded at $1.4973 per euro as of 9:35 a.m. in Tokyo from $1.4965 in New York yesterday after earlier declining to $1.4981, the weakest since August 2008.

The Standard & Poor’s 500 Index rose 0.9 percent to 1,097.91 in New York yesterday and the Dow Jones Industrial Average climbed 1 percent to 10,092.19. Australia’s benchmark S&P/ASX 200 Index gained 1.2 percent at 11:12 a.m. Sydney time.

Gasoline Supplies

Gasoline inventories probably declined for a second week, falling 1.5 million barrels in the week ended Oct. 16, according to the median of seven estimates by analysts surveyed by Bloomberg News before the Energy Department’s report tomorrow.

Futures climbed last week after a report from the Department showed an unexpected decline in stockpiles of gasoline as refineries idled units. The decrease was the steepest since Hurricanes Gustav and Ike shut refineries representing about a fifth of U.S. capacity in September 2008.

Inventories of crude oil probably rose 1.5 million barrels last week from 337.8 million, the survey showed.

Brent crude oil for December settlement traded at $77.71 a barrel, down 6 cents, on the London-based ICE Futures Europe exchange at 8:47 a.m. Singapore time. Yesterday, the contract rose 78 cents, or 1 percent, to $77.77.