Crude Oil Trades Near $75 as Rising Equities Boost Confidence

Jan. 26 (Bloomberg) -- Crude oil traded little changed near $75 a barrel after rising from a one-month low yesterday as a rebound in U.S. equities and a weaker dollar encouraged investors to buy commodities.

Oil climbed 1 percent and stocks rallied on signs Ben S. Bernanke will keep his job as Federal Reserve Chairman. It also gained after a worse-than forecast slump in U.S. home sales failed to push oil below $74 a barrel. A report tomorrow will probably show U.S. refiners cut operating rates for a second week amid weak demand, according to a survey of analysts.

“The housing sales were very poor,” said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. “We’re coming down from decade-highs for fuel and energy supplies, so $80 oil was just unsustainable. Even in the mid-seventies we’re going to have problems” given rising supplies and the risk of slower growth in Asia, he said.

Crude for March delivery traded at $75.08 a barrel, down 18 cents, in after-hours electronic trading on the New York Mercantile Exchange at 8:39 a.m. in Singapore.

The contract climbed 72 cents to $75.26 yesterday, its first gain in four days. Futures fell 10 percent in the preceding two weeks from a 15-month high of $83.95 a barrel.

“Stock market optimism is driving us up a bit,” Phil Flynn, vice president of research at PFGBest in Chicago, said yesterday. “There was a lot of support at around $74, and with the stock market higher, traders weren’t confident enough to take that out.”

S&P 500 Gains

The Standard & Poor’s 500 Index advanced 0.5 percent to 1,096.78 in New York yesterday. The index is up 62 percent since March 9 as governments worldwide pledged more than $12 trillion to revive the economy. The Nikkei-225 Stock Average climbed 0.1 to 10,520.54 in Tokyo.

Oil earlier yesterday fell to $74.06, close to the one- month low reached Jan. 22. Sales of existing U.S. homes sales plunged by a more than anticipated 17 percent in December, the most since the series started in 1968.

Crude’s direction from here is “sketchy,” Altavest’s Hartmann said. A decline through $74, near the March contract’s 200-day moving average, may trigger a slide that would take prices back to $63 by the second quarter, he said.

“If we get some dollar weakness heading into this week maybe the market survives for a little bit longer, and kind of re-tests the $78-$79 level,” he said. “The bears kind of have the upper hand at this point.”

U.S. Inventories

A U.S. Energy Department report tomorrow will probably show crude-oil inventories rose last week as imports gained and refineries shut units, based on a Bloomberg survey of analysts.

Stockpiles probably climbed 1.58 million barrels in the week ended Jan. 22 from 330.6 million the prior week, according to the median of 12 analyst’s estimates. Refining rates, already at their lowest outside the Atlantic hurricane season since at least 1989, probably fell 0.3 percentage point.

Brent oil for March settlement increased 86 cents, or 1.2 percent, to $73.69 a barrel on the London-based ICE Futures Europe exchange yesterday.

Oil prices will rise to $95 a barrel by the end of the year as demand recovers, Morgan Stanley said in a report by Hussein Allidina, a commodities analyst. Declining crude inventories and the improving economy will boost prices this year and take them to an average $100 a barrel in 2011, according to the report.

Prices between $70 and $80 are “almost perfect” and provide sufficient returns for investment without harming the global economy, Saudi Arabia’s Oil Minister Ali al-Naimi said yesterday.

Saudi Arabia is the biggest producer in the Organization of Petroleum Exporting Countries. The group, which sells about 40 percent of the world’s oil, is pumping about 1.77 million barrels a day more than output quotas set late 2008 to prevent a glut. Iraq is not restricted by quota.

“OPEC are going to have real problems curbing their supply,” Altavest’s Hartmann said. “This price level isn’t killing or crimping the economy. But the supply eventually is going to kill this market.”