Oil Rises for Second Day on Demand Outlook, Supply Constraints

Jan. 11 (Bloomberg) -- Crude oil rose for a second day on speculation increasing demand and constraints on supply will reduce global stockpiles and support prices.

Oil imports by China, the world’s second-largest consumer, climbed 24 percent in December to reach a record annual total of 203.8 million metric tons, according to a customs report yesterday. Chevron Corp. said the Makaraba-Utonana pipeline it operates in southern Nigeria’s Delta state was breached on Jan. 8, shutting-in 20,000 barrels a day of crude.

“Asia has obviously performed well throughout this recession,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “Beyond the short-term, the global economy, and the U.S. in particular, the largest consumer of oil, is in the early stages of a recovery, which suggests that demand is on the mend.”

Crude oil for February delivery rose as much as 71 cents, or 0.9 percent, to $83.46 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $83.43 at 8:07 a.m. Singapore time.

The contract rose 9 cents to $82.75 on Jan. 8 after the dollar tumbled on a report showing employment in the U.S. unexpectedly fell in December. Futures climbed 4.3 percent last week and gained in 11 of the past 12 sessions as freezing temperatures in Europe and North America boosted heating demand.

The cold snap “has done its part in eating away at the distillates stockpiles, but really it’s the industrial demand that the market is going to be focusing on,” Hassall said. “We’ve still got an ample supply cushion” and that will limit the pace of any price gains from here, he said.

U.S. Inventories

U.S. crude oil stockpiles rose for the first time in five weeks in the period ended Jan. 1, and are 0.5 percent higher than the same time a year ago, according to Energy Department data. Distillate supplies, including heating oil and diesel, fell for a fourth week and were 8.9 percent higher than a year earlier.

Brent crude oil for February settlement rose 52 cents, or 0.6 percent, to $81.89 a barrel on the London-based ICE Futures Europe exchange. It fell 0.2 percent to $81.37 on Jan. 8.

The dollar slid as much as 0.5 percent to $1.4479 per euro in early Asian trading, from $1.4409 in New York on Jan. 8, and last traded at $1.4470. A weaker dollar improves the investment appeal of commodities priced in the currency.

New York oil futures climbed 78 percent last year as the sliding U.S. dollar steered investors toward commodities and production restraint by the Organization of Petroleum Exporting Countries helped stem rising stockpiles as demand improved.

Closer quota compliance by OPEC member states will be needed to maintain recent price gains amid forecast weak first- half demand, Iran’s OPEC Governor Mohammad Ali Khatibi told the state-run Fars news agency on Jan. 8.

Hedge-fund managers and other large speculators increased bets on rising oil prices for three straight weeks, according to U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, climbed 16 percent to 108,835 contracts on the New York Mercantile Exchange in the week ending Jan. 5, the commission said in its weekly report.