Oil Trades Above $74 After Rising on Signs of Economic Recovery

Dec. 23 (Bloomberg) -- Crude oil traded above $74 a barrel in New York after rising on signs that economies around the world are recovering.

Oil advanced 0.9 percent yesterday as a U.S. report showed sales of existing homes in the world’s biggest energy-consuming country increased in November to the highest level in almost three years. The U.S. economy expanded 2.2 percent in the third quarter, compared with a 2.8 percent gain previously reported.

“The weaker than expected revised GDP number was very much overshadowed by the upbeat housing market data,” Toby Hassall, a research analyst at CWA Global Markets Pty, said from Sydney. “I think the psychology has changed significantly. There are increasing signs of recovery in the key market, the U.S.”

Crude oil for February delivery was at $74.50, up 10 cents, in electronic trading on the New York Mercantile Exchange at 11:25 a.m. Sydney time. Oil, which rose 68 cents to $74.40 yesterday, is up 67 percent this year.

Traders are expecting reduced volumes during the final two weeks of the year as investors take holidays. There will be no trading on Dec. 25 for Christmas and on Jan. 1 for New Year’s Day.

“The volume is going to stay low through the end of the year,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Traders are testing the recent range.”

Futures in New York have traded between $68.59 and $82 since Oct. 6.

OPEC Holds Quotas

“Unless there’s a major catalyst, oil isn’t going to move much in either direction,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Prices have been in a range for a couple months and that’s likely to continue.”

The U.S. currency traded at $1.4251 versus the euro early today, little changed from $1.4249 in New York yesterday, when it touched $1.4218, the highest since Sept. 4.

U.S. existing home purchases increased 7.4 percent to a 6.54 million annual rate from a revised 6.09 million pace the prior month, the National Association of Realtors said yesterday in Washington. It was the highest level since February 2007. The U.K. economy shrank 0.2 percent, less than the 0.3 percent contraction initially reported by the government.

The Organization of Petroleum Exporting Countries agreed at a meeting in Luanda, Angola, to hold quotas at 24.845 million barrels a day. OPEC ministers have met four times this year without revising production figures.

Compliance Breaches

Rising prices have encouraged some OPEC members to renege on their pledge in 2008 to reduce output by 4.2 million barrels a day. Members complied with 58 percent of cuts in November, down from 60 percent the previous month, according to International Energy Agency estimates.

Abdalla el-Badri, the OPEC secretary general, said he wants quota compliance to improve to between 75 percent and 80 percent from the current level of about 60 percent.

“No change in quotas was largely expected by the market,” said Kaha Kiknavelidze, a managing partner at London-based Rioni Capital Partners LLP, a hedge fund that specializes in emerging markets. “More important is compliance, which has deteriorated meaningfully. That puts pressure on prices.”

Brent crude oil for February settlement increased 47 cents, or 0.6 percent, to end the session yesterday at $73.46 a barrel on the London-based ICE Futures Europe exchange.

A government report due today is forecast to show that U.S. supplies of crude oil fell 1.6 million barrels last week, according to the median of 16 responses by analysts in a Bloomberg News survey.

Stockpiles of distillate fuel, a category that includes heating oil and diesel, also dropped, the analysts said. Gasoline inventories probably rose.

The industry-funded American Petroleum Institute said crude oil inventories fell by 3.71 million barrels last week to 328.8 million. Supplies of gasoline declined by 1.1 million barrels to 215.9 million.