Friday, March 5, 2010

Crude Oil Poised for Weekly Gain on Improved Economic Outlook

March 5 (Bloomberg) -- Crude oil rose in New York, poised for the third weekly gain in four, on optimism fuel demand will increase amid improved prospects for an economic recovery in the U.S., the world’s biggest energy consumer.

Oil also gained on a report that the Organization of Petroleum Exporting Countries will cut shipments by 2.3 percent in the month ending March 20. Crude pared yesterday’s 0.8 percent decline after U.S. initial jobless applications fell in the week ended Feb. 27, easing concerns that a jobs report today will signal a deteriorating labor market.

“The market is anticipating better unemployment data in the U.S. tonight, so that has given us a positive outlook,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “Our expectations and prospects are for consumption of crude should pick up.”

Crude oil for April delivery rose as much as 60 cents, or 0.8 percent, to $80.81 a barrel, in electronic trading on the New York Mercantile Exchange. The contract was at $80.61 at 3:19 p.m. Singapore time. Yesterday, it fell 66 cents to settle at $80.21. Prices are poised for a 1.2 percent gain this week.

Initial jobless applications in the U.S. dropped by 29,000 to 469,000, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed yesterday. A report today may show payrolls declined by 65,000 workers last month, more than the prior drop of 20,000, according to the median of economist estimates.

OPEC, which supplies about 40 percent of the world’s crude, will ship 22.87 million barrels a day in the four-week period, compared with 23.42 million a month earlier, the Halifax, England-based tanker-tracker Oil Movements said yesterday in a report. The data excludes Ecuador and Angola.

Maintenance Season

“We’re moving towards the eastern refinery maintenance season during the second quarter,” Oil Movements founder Roy Mason said in a telephone interview from Halifax, England. “We’re also at the end of the northern hemisphere winter, and the seasonality of winter demand in the east is quite sharp.”

OPEC Secretary-General Abdalla el-Badri said on Feb. 2 that ministers will be unlikely to alter their existing quota of 24.845 million barrels a day unless market conditions change. Compliance with this target is around 55 percent, according to Oil Movements. The group will next meet on March 17.

Oil dropped yesterday as the dollar climbed against the euro after European Central Bank President Jean-Claude Trichet kept the benchmark interest rate unchanged and extended some stimulus measures to cement the economic recovery. The dollar traded at $1.3581 per euro at 3:15 p.m. Singapore time, from $1.3581 yesterday.

Contango Narrows

U.S. crude inventories last week climbed a more-than- expected 4.03 million barrels to 341.5 million barrels, the Energy Department said on March 3. Stockpiles in the Gulf of Mexico region, where the majority of U.S. refining capacity is located, climbed by 1.8 million barrels.

Some of this gain may have come as a result of the narrowing of the contango, when prompt prices are lower than later-dated supplies, in the market. The price difference between the April contract and May futures has dropped to 42 cents a barrel today from 62 cents a barrel on Feb. 3.

A theme in the market “has been the flattening of the prompt end of the price curve,” said Barclays Capital analysts in a March 3 research note. “We wonder if the collapse of the contango is causing the last dregs of the floating storage to start washing up in the U.S. data.”

Brent crude oil for April delivery rose as much as 64 cents, or 0.8 percent, to $79.18 a barrel on the London-based ICE Futures Europe exchange. The contract was at $78.90 at 3:19 p.m. Singapore time. It fell 0.9 percent to $78.54 yesterday.


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