Crude Oil Rises a Third Day on Recovery in Global Fuel Demand

Oct. 12 (Bloomberg) -- Crude oil rose for a third day on speculation fuel demand will increase as the global economy emerges from recession.

Oil climbed after U.S. equity markets reached their highest in a year Oct. 9, fanning hope for a recovery in world energy consumption. An Investors Business Daily survey due tomorrow in the U.S., the world’s largest energy user, may show consumers were optimistic for a third month, according to economists surveyed by Bloomberg News.

“We are looking at an international economy that is going to be stronger in 12 months’ time,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “There’s that conviction that things are going to be better down the track” even when some data is not “especially supportive,” he said.

Crude oil for November delivery climbed as much as 79 cents, or 1.1 percent, to $72.56 a barrel in electronic trading on the New York Mercantile Exchange. It was at $72.23 at 9:26 a.m. Singapore time. Futures have gained 62 percent this year.

Oil added 8 cents to $71.77 a barrel Oct. 9, the highest settlement since Sept. 18, after the International Energy Agency upgraded its 2010 demand forecast for a third month. Prices rose for a second week as the Standard & Poor’s 500 Index rallied and the Dollar Index slipped to a one-year low, bolstering the investment appeal of commodities.

‘Suitable’ Price

Oil prices between $60 and $80 a barrel are suitable for exporters and importers, Kuwaiti Oil Minister Sheikh Ahmad al- Abdullah al-Sabah told state-run news agency KUNA yesterday. Kuwait is a founding member of the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s crude.

“Oil, at the end of the day, is still in that $65 to $75 range,” said Moore at Commonwealth Bank of Australia. “Have we now got to a point where, to get back to the $80s or higher, you actually need tight markets?”

U.S. stockpiles of distillate fuel, including heating oil and diesel, are at their highest since January 1983, according to Energy Department data. Gasoline inventories climbed 2.94 million barrels to 214.4 million as refiners boosted output, the department said Oct. 7.

“Gasoline demand seems to have steadied, but the distillate demand still seems very weak,” Moore said. “It draws into question just how the U.S. economy is really going.”

Brent crude oil for November settlement rose as much as 56 cents, or 0.8 percent, to $70.56 a barrel on the London-based ICE Futures Europe exchange. It was at $70.48 a barrel at 9:27 a.m. in Singapore. The contract gained 0.3 percent to $70 a barrel Oct. 9, the highest settlement since Sept. 22.

Yen Near 2-Week Low Before German Investor Confidence Report

Oct. 12 (Bloomberg) -- The yen traded near a two-week low against the euro before a report tomorrow forecast to show German investor confidence rose to the highest level in 3 1/2 years, boosting demand for higher-yielding assets

The dollar was close to a one-year low versus its Canadian counterpart before U.S. reports this week that may show retail sales fell in September while factory production cooled, adding to signs the U.S. may trail other countries in emerging from recession. Australia’s dollar traded near its highest since August 2008 versus the greenback as traders increased bets the central bank will raise interest rates.

“Japanese investors are still looking to put some funds abroad,” said Norifumi Yoshida, vice president of the trading section at Mizuho Corporate Bank Ltd. in Singapore. “This is likely to be negative for the yen.”

The yen traded at 132.38 per euro as of 10:14 a.m. in Tokyo from 132.25 yen in New York on Oct. 9 after earlier touching 132.48 yen, the lowest level since Sept. 25. It was at 90.08 per dollar from 89.78. Japan’s currency traded at 81.32 versus the Australian dollar from 81.12.

The U.S. currency fetched C$1.0444 from C$1.0422 in New York on Oct. 9, after falling to C$1.0407, the weakest level since Sept. 29, 2008. Australia’s dollar traded at 90.27 U.S. cents from 90.37 cents. It reached 90.90 cents on Oct. 8, the most since August 2008.

Foreign-exchange movements may be more exaggerated than usual in Asia as national holidays in the U.S., Canada and Japan reduce liquidity, said Yoshida.

Germany’s ZEW

Germany’s ZEW Center for European Economic Research will say its index of investor and analyst expectations, which aims to predict developments six months ahead, rose to 58.8 in October, the highest since April 2006, from 57.7 in September, according to a Bloomberg News survey of economists.

The 16-nation euro region’s economy “is showing signs of stabilization,” European Central Bank President Jean-Claude Trichet said in a speech in Venice, Italy, on Oct. 9. “In the period ahead, we see a very gradual recovery.”

Benchmark interest rates are 0.1 percent in Japan and as low as zero in the U.S., compared with 3.25 percent in Australia and 1 percent in the euro-zone.

The dollar weakened versus Canada’s currency before U.S. reports this week estimated to show the recovery in the world’s largest economy will be slow, backing the case for the Federal Reserve to keep interest rates low.

Downside Risk

U.S. purchases dropped 2.1 percent in September after rising 2.7 percent in August, according to a Bloomberg News survey of economists before the Commerce Department releases the report on Oct. 14. Industrial production expanded 0.1 percent in September after increasing 0.8 percent in August, a separate Bloomberg survey showed before the Fed’s report on Oct. 16.

“We’ve got some risk for the downside, with things like retail sales,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “We still got rates very much on hold deep into next year in the U.S. and we’re inclined to believe that the dollar weakness is intact, particularly against the euro.”