Oil Rises to One-Month High as U.S. Holiday Retail Sales Gain

Dec. 28 (Bloomberg) -- Crude oil rose to a one-month high as U.S. retail sales climbed over the holiday season and China said its economy grew faster than estimated this year, signs the worst global recession since World War II is abating.

Oil increased for a fourth day as holiday spending gained 3.6 percent from a year earlier, according to an estimate by MasterCard Advisors’ SpendingPulse. China’s expansion will be more than 8 percent in 2009, according to government officials.

“Everything is just looking up,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “There’s economic growth, everyone’s talking about the strong retail sales over the holidays, and we’ll see China grow. Iran tensions can only get worse and employment next month will probably increase.”

Crude oil for February delivery rose 72 cents, or 0.9 percent, to $78.77 a barrel on the New York Mercantile Exchange, the highest close since Nov. 18.

The U.S. economy next year will turn in its best performance since 2004 as spending picks up and companies increase investment and hiring, said Dean Maki, the most accurate forecaster in a Bloomberg News survey. The world’s largest economy will expand 3.5 percent in 2010, said Maki, the chief U.S. economist at Barclays Capital Inc. in New York.

The number of Americans filing claims for unemployment benefits last week declined to the lowest level since September 2008, the Labor Department said Dec. 24. Initial jobless claims fell by 28,000, more than forecast, to 452,000 in the week ended Dec. 19. The U.S. is the world’s biggest energy user.

Iran Protests

The U.S. and the European Union today condemned Iran’s harshest crackdown on opposition protests in six months after at least eight people were killed in clashes with security forces. The U.S. government has threatened to impose sanctions after a Dec. 31 deadline unless Iran responds to diplomatic efforts aimed at allaying suspicions it is developing nuclear weapons.

Iran will have the technology to build a nuclear weapon by early 2010, Israeli Defense Minister Ehud Barak told a parliamentary committee today, according to an official who spoke on condition of anonymity because the meeting was held behind closed doors.

Iran is the second-largest oil producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia.

Brent crude for February settlement rose $1.01, or 1.3 percent, to $77.32 a barrel on the ICE Futures Europe exchange in London.

Supply Dispute

Russia warned the European Union that it may cut off oil supplies to Slovakia, Hungary and the Czech Republic because of a dispute over transits, the Slovak government said today.

At least 20 European countries suffered disruption of Russian natural-gas imports in January as the world’s largest producer of the fuel cut supplies to Ukraine during a payment dispute. Russian oil exports to Europe were interrupted in January 2007 when Belarus sought to tax transits.

Oil prices have gained 77 percent this year and are poised for their best annual performance in a decade as the accelerating economy raises energy demand. The International Energy Agency increased its forecast for 2010 global oil consumption to 86.3 million barrels a day on Dec. 11, 130,000 barrels a day more than its previous estimate.

“We could trade anywhere in the $80-to-$85 range by Thursday, which will set the tone for the first two weeks of the year,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. Crude prices are testing the upper end of a trading range between the high $60s and low $80s, in place since the end of July, he said.

U.S. Forecast

Cold weather will raise U.S. consumption of heating fuels by 6.7 percent in the next seven days, according to forecasts from Weather Derivatives. The temperature in New York may fall as low as 20 degrees Fahrenheit (minus 7 Celsius) tomorrow, 5 degrees below average, according to Weather.com.

Heating oil for January delivery climbed 3.79 cents, or 1.9 percent, to $2.0735 a gallon on the Nymex, the highest since Dec. 1.

“It is cold in the U.S.,” said Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix GmbH. “That’s going to bring some additional demand.”

U.S. inventories of distillate fuel, including heating oil and diesel, probably dropped 2.25 million barrels last week from a five-month low of 161.3 million barrels the week before, according to the median of nine estimates by analysts before the Energy Department report this week. Eight respondents forecast a decrease and one said there was a gain.

Oil inventories probably fell 2.2 million barrels from 327.5 million the prior week, according to the survey. Seven respondents forecast a decline, and two said there was an increase.

Oil volume in electronic trading on the Nymex was 162,958 contracts as of 2:51 p.m. in New York. Volume totaled 169,527 contracts Dec. 24, 71 percent below the average of the past three months. Open interest was 1.2 million contracts.