Crude Oil Rises as IEA Bolsters Demand Forecast, Dollar Slides

Sept. 11 (Bloomberg) -- Crude oil is poised for its first weekly gain in three after the International Energy Agency increased its 2010 estimate for global demand for a second consecutive month and the dollar traded near a nine-month low.

World oil demand is likely to average 85.7 million barrels a day next year, according to a monthly report from the Paris- based agency yesterday. That’s 450,000 barrels a day more than estimated in August. The dollar was near its lowest level since Dec. 18 against the euro on speculation reports today will show China’s factory output gained and exports dropped at a slower pace, reducing demand for the U.S. currency as a refuge.

“The IEA’s positive demand forecast is going to support prices,” said Chip Hodge, who oversees a $9 billion natural- resource bond portfolio as managing director at MFC Global Investment Management in Boston. “Demand is set to rise anyway because of the onset of winter.”

Crude oil for October delivery fell 2 cents to $71.92 a barrel on the New York Mercantile Exchange at 7:26 a.m. Singapore time. Prices have gained 5.7 percent this week and are up 61 percent this year.

The change in the forecast “is quite substantial,” Ian Fyfe, the head of the IEA’s oil industry and markets division, said in a telephone interview from Paris yesterday. “It is premised on stronger North American and Chinese demand. There are still a lot of question marks, in particular about industrial demand.”

The agency advises its 28 members on energy policy and was set up in response to the 1974 Arab oil embargo.

Buffeted Market

“The more dynamic emerging markets are leading this upward revision by the IEA,” said Harry Tchilinguirian, senior oil analyst at BNP Paribas SA in London. “What’s driving this market on a day-to-day basis is what other asset markets are doing. It’s buffeted between forex and equities.” The Standard & Poor’s 500 Index rose 1 percent to 1,044.14 and the Dow Jones Industrial Average increased 0.8 percent to 9,627.48.

Prices also advanced after U.S. oil inventories dropped more than expected and OPEC maintained output quotas.

The Organization of Petroleum Exporting Countries agreed to maintain output quotas at 24.845 million barrels a day and will urge members to adhere to their targets, OPEC Secretary-General Abdalla El-Badri said in a briefing yesterday.

OPEC’s decision to maintain current production targets “is quite sensible and we welcome this decision,” the IEA’s executive director, Nobuo Tanaka, told reporters in Lisbon yesterday. “The global economic situation is probably improving and we want to maintain it.”

Third Meeting

The OPEC meeting, which ended early yesterday in Vienna, was the third this year at which the group left production quotas unchanged. OPEC is urging members to adhere more closely to its output targets. The 11 members bound by quotas pumped 26.055 million barrels a day in August, according to a Bloomberg News survey, which indicates quota compliance of about 71 percent.

“OPEC is happy because it doesn’t have to do anything,” Hodge said. “Most people, both producers and consumers, seem to be content with prices at this level.”

Brent crude oil for October settlement increased 3 cents to end the session at $69.86 a barrel on the London-based ICE Futures Europe exchange.

U.S. stockpiles of crude oil fell 5.91 million barrels to 337.5 million, an Energy Department report showed. Supplies were estimated to decline by 1.85 million barrels, according to the median of 16 responses from analysts in a Bloomberg News survey.

Fuel Stockpiles

Gasoline inventories rose 2.07 million barrels to 207.2 million last week, the first gain in seven weeks, the department said. Supplies were forecast to drop by 1.5 million barrels, according to a Bloomberg News survey. Demand for the fuel fell 2.1 percent to an average 9.28 million barrels a day.

Stockpiles of distillate fuel, a category that includes heating oil and diesel, climbed 1.99 million barrels to 165.6 million, the highest since January 1983.

Gasoline for October delivery declined 2.45 cents, or 1.3 percent, to settle at $1.8036 a gallon in New York. Heating oil for October delivery fell 0.59 cent, or 0.3 percent, to end the session at $1.7885.

Gold Little Changed as Dollar Slips Against Euro; Silver Gains

Sept. 10 (Bloomberg) -- Gold was little changed, paring an earlier decline, as the dollar slipped against the euro, boosting the metal’s appeal as an alternative asset. Silver rose.

The dollar sank as much as 0.4 percent against the European currency, erasing an earlier gain. Gold fell as much as 1.4 percent before rebounding. On Sept. 8, gold, which tends to rise when the dollar weakens, reached $1,009.70 an ounce in New York, the highest since March 2008. The price briefly topped $1,000 today, after the day’s settlement, as the greenback declined.

“Gold is gaining ground on the U.S. dollar weakness today,” Miguel Perez-Santalla, a Heraeus Precious Metals Management sales vice president in New York, said by e-mail.

Gold futures for December delivery slipped 30 cents to $996.80 an ounce on the New York Mercantile Exchange’s Comex division. The most-active contract has surpassed $1,000 in each of the past three days.

In London, bullion for immediate delivery rose $3.95, or 0.4 percent, to $996.24 an ounce at 7:10 p.m. local time, after falling as much as 1 percent earlier. Spot prices advanced 4.3 percent this month through yesterday as the euro gained 1.6 percent against the U.S. currency.

“A deeper pullback in the dollar could keep prices supported, but for sustained gains we shall need to see renewed risk aversion,” Andrey Kryuchenkov, a VTB Capital analyst in London, wrote today in a note.

Equity Indexes Rise

U.S. equity indexes advanced, a sign that investors may have a higher tolerance for risk. The benchmark Standard & Poor’s 500 Index rose as much as 1 percent, extending a September gain of 1.2 percent through yesterday.

The Bank of England plans to keep buying as much as 175 billion pounds ($291 billion) in assets to cement the economy’s recovery, according to a statement today. The U.K. central bank kept its main interest rate at 0.5 percent. Some analysts say government spending may spark accelerating inflation and currency debasement.

“Gold will remain well-supported, driven by dollar weakness, demand from China and inflation expectations,” Liam Fitzpatrick, a Citigroup Inc. analyst in London, said today in a report. The metal will trade between $900 and $1,000 an ounce, he predicted.

Ian Williams, the chief executive officer of Charteris Portfolio Managers in London, predicted gold will trade from $1,250 to $1,300 an ounce within the next six months.

“Sooner or later, you get a situation where everything is going up,” Williams said in a Bloomberg Television interview. “Gold is going up, because it’s liquidity driven.”

Silver Climbs

Silver futures for December delivery gained 20 cents, or 1.2 percent, to $16.70 an ounce. The most-active contract surged to a 13-month high of $16.86 on Sept. 8 and is up 20 percent in the past three weeks, pushing its 2009 gain to 48 percent.

Silver is “vulnerable to one of its idiosyncratic collapses,” John Reade, UBS AG’s head metals strategist in London, said today in a note. “We recommend taking any profits in silver.”

Platinum for October delivery declined $1.70, or 0.1 percent, to $1,289.70 an ounce in New York, up 37 percent this year. Credit Agricole SA’s Calyon unit in London raised its 2010 price forecast for the metal by 8.3 percent to $1,300 an ounce, citing improving economic growth. Palladium for December delivery declined $1.60, or 0.5 percent, to $293.45 an ounce.

Outperforming Gold

“We expect silver and platinum to continue to outperform gold as economic conditions improve,” Citigroup’s Fitzpatrick said in his report. Platinum, used in automotive emissions- control parts, may rise toward $1,400 an ounce by the end of the year, he wrote, citing “potential restocking in the global auto market and curtailment of supply.”

Automakers account for about 60 percent of platinum and palladium use, according to metals researcher and refiner Johnson Matthey Plc.

Tomorrow, the New York Mercantile Exchange plans to observe a moment of silence to commemorate the events of Sept. 11, 2001. In a statement today, President Barack Obama asked all Americans to pause in their activities at 8:46 a.m. New York time to honor the victims of the terrorist attacks eight years ago.