Monday, April 26, 2010

Crude Oil Trades Above $85 on Speculation Demand Recovering

April 26 (Bloomberg) -- Crude oil traded above $85 a barrel on speculation demand will increase as the world economy recovers from recession.

A Conference Board report due tomorrow in the U.S., the world’s largest energy user, will probably show consumer confidence climbed for a second month to a three-month high. Iraq, OPEC’s third-largest producer, will resume oil shipments on its Kirkuk-to-Ceyhan pipeline mid-week once blast repairs are completed, North Oil Co. said yesterday.

“Data on the economic side, especially in the U.S., are getting much, much better than expected,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo. “The gasoline demand season is just starting in the U.S. so I’m not really pessimistic about the high inventory levels” there, he said.

Crude oil for June delivery rose as much as 30 cents, or 0.4 percent, to $85.42 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $85.25 at 8:42 a.m. in Tokyo.

The contract climbed 1.7 percent to $85.12 on April 23, the highest settlement since April 15, after government reports showed that U.S. sales of new homes surged in March and orders for non-transport durable goods climbed. Commodities also rallied as the dollar fell against the euro for the first time in seven days.

A Commerce Department report showed that sales of U.S. new homes increased 27 percent, the most since April 1963. Bookings for goods meant to last at least three years, excluding cars and aircraft, climbed 2.8 percent last month, the most since the recession began in December 2007, the department said.

Rally, Inventories

The June oil contract increased 0.5 percent last week and has gained 1.2 percent this month. Prices rose even after a report showed U.S. crude oil inventories unexpectedly climbed 1.89 million barrels to 355.9 million in the week ended April 16.

While the overall level of inventories is high, the pattern of movements is similar to recent years, Astmax’s Emori said. The direction from here will be more important than the absolute level, and oil is likely to be sustained between $80 and $90 a barrel for the rest of the year, he said.

“Ninety could be reachable, but over $90 to $95 would probably be difficult unless there are more strong factors on the fundamental side appearing,” he said.

Hedge-fund managers and other large speculators increased their bets on rising oil prices last week, according to U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, increased 7 percent to 121,475 contracts on the New York Mercantile Exchange, the Washington-based commission said last week.

Brent crude oil for June settlement rose 15 cents to $87.40 a barrel on the London-based ICE Futures Europe exchange. It climbed 1.8 percent to $87.25 on April 23.