Oil Trades Near One-Month Low After Investor Confidence Wanes

Jan. 25 (Bloomberg) -- Crude oil traded near a one-month low as sliding equity markets and expectations of interest-rate increases in China dented investor confidence in the strength of the global economic recovery.

OPEC nations must improve their compliance with the group’s output quotas to prevent further pressure on oil prices, Shokri Ghanem, chairman of Libya’s National Oil Corp., said yesterday. A report today in the U.S., the world’s largest oil user, will probably show existing home-sales fell for the first time in four months, according to a Bloomberg News survey of economists.

“We’ve seen a pretty significant turn in macro sentiment,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. Oil “was very much a forward-looking market last year pricing in a recovery. We’ve seen some encouraging signs, and the U.S. certainly is looking a lot better than it was 12 months ago, but that’s a different thing to a material recovery.”

Crude oil for March delivery was at $74.62 a barrel, up 8 cents, in after-hours electronic trading on the New York Mercantile Exchange at 10:04 a.m. in Singapore. Earlier the contract fell as much as 43 cents, or 0.6 percent, to $74.11. It dropped 2 percent to $74.54 on Jan. 22, the lowest settlement since Dec. 22.

Prices slumped 4.9 percent last week as U.S. gasoline stockpiles reached a 22-month high, equities and commodities tumbled on the nation’s bank reform plans, and investors fretted that China will raise interest rates to slow growth in the world’s second-largest energy consumer.

Oil Spill

China “brought the focus back to still-weak demand from a lot of the advanced economies,” CWA’s Hassall said. “This dip in oil is maybe a good opportunity to get in long. But I guess, if we do see equities continue their sell-off this week that would certainly suggest that oil could follow.”

The Sabine Neches Waterway, the Texas ship channel serving four refineries that process about 6.5 percent of total U.S. capacity, remained closed indefinitely after a collision between a tanker and vessel spilled about 11,000 barrels of oil, the U.S. Coast Guard said.

Cleanup crews are working 24-hours daily, Coast Guard Petty Officer Richard Brahm said in a telephone interview from Port Arthur, Texas. The waterway may open to vessel traffic within five days, Dow Jones reported earlier, citing Capt. J.J. Plunkett of the Coast Guard.

The vessel, owned by AET Tankers of Malaysia, was traveling to Exxon Mobil Corp.’s Beaumont refinery, one of four located near the waterway. The other three are operated by Royal Dutch Shell Plc’s Motiva Enterprises, Valero Energy Corp. and Total SA. The four plants have a combined processing capacity of 1.15 million barrels of oil a day.

Brent, Equities

Brent oil for March settlement was at $72.95 a barrel, up 12 cents, on the London-based ICE Futures Europe exchange at 10 a.m. Singapore time. It fell 2.3 percent $72.83 on Jan. 22.

New York oil futures reached a 15-month high of $83.95 a barrel on Jan. 11 as rising equity markets emboldened investors and traders speculated freezing temperatures in Europe and the U.S. would help draw down above-average distillate supplies.

Prices plunged 10 percent the past two weeks as U.S. fuel stockpiles and temperatures rose, China increased reserve requirements for its banks, and the Standard & Poor’s 500 Index fell to a seven-week low.

Asian equities fell for a sixth day with the MSCI Asia Pacific Index down 0.8 percent as of 10:17 a.m. Tokyo time. The Nikkei-225 Stock Average was off 1.3 percent.

Hedge Funds

Hedge-fund managers and other large speculators reduced their bets on rising oil prices for the first time in five weeks, based on U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 1 percent to 134,381 contracts in the week ended Jan. 19, the commission said last week. Positions a week earlier were the highest in at least 27 years.

The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil. The group slashed production quota’s late 2008 to prevent a glut as the world economy entered its worst recession since World War II.

Oil will likely fluctuate between $75 and $85 a barrel this year as growth in Asia increases demand and on speculation by investors, Libya’s Ghanem said in an interview yesterday.