Oil Is Little Changed After Climbing on Manufacturing Data

dailyforexnews · #1 (**permalink**) 11-03-2009, 02:26 AM

Crude oil traded little changed in New York after rising from a two-week low as growth in manufacturing spurred hopes of an economic recovery.

U.S. stocks gained, with the Dow Jones Industrial Average gaining 76.71 points, or 0.8 percent, to 9,789.44 after the Institute for Supply Management said manufacturing grew at the fastest pace in more than three years. Manufacturing also expanded in China and Europe.

“The price of oil went up and down based on the equities market,” Mike Sander, an investment adviser at Seattle-based Sander Capital Advisors, wrote in an e-mail report.

Crude oil for December delivery was up 1 cent, or 0.1 percent, at $78.14 a barrel on the New York Mercantile Exchange at 11:22 a.m. Sydney time. Crude has risen 75 percent this year.

Futures lost 4.4 percent last week, the first pullback in a month, after U.S. crude oil and gasoline stockpiles rose, equities declined and the dollar’s rebound reduced the investment appeal of commodities. Prices dropped 3.6 percent on Oct. 30 after a report showed U.S. consumer spending in September fell for the first time in five months.

Reports on U.S. home sales and construction also beat expectations in another sign of an improving economy.

The number of contracts to buy previously owned homes in the U.S. rose in September for an eighth straight month as Americans rushed to meet a deadline for a home-buyer credit, according to a report today from the National Association of Realtors in Washington. Construction spending climbed the most since September 2008.

Dollar Weakness

The dollar traded at $1.4799 per euro, compared with $1.4775 in New York yesterday, and may fall for a second day amid speculation the Federal Reserve this week will keep interest rates low.

Volatility has increased amid “unease in the investment world” and uncertainty about banks’ ability to repay the money they owe, the investment adviser Sander wrote in his note. “With added volatility can also come pressure for the market to pull back.”

Output from the Organization of Petroleum Exporting Countries expanded to its highest level in 10 months, a Bloomberg News survey showed.

“We do think there will be more OPEC oil in the market as OPEC tries to keep oil below $80 a barrel,” said Phil Flynn, vice president of research at PFGBest in Chicago. The OPEC estimate is acting as a counterweight to the bullish economic news, he said.

OPEC Output

OPEC output averaged 28.76 million barrels a day in October, up 80,000 barrels from September, according to a Bloomberg survey of oil companies, producers and analysts. The entire gain came from the OPEC members with quotas, all except Iraq. The 11 countries pumped 26.31 million barrels a day, 1.465 million barrels above their target. Iraqi output was unchanged.

“It doesn’t help OPEC’s cause if, as reports indicate, they decide to increase production at a time when demand is still not very robust,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “It may be some time before there’s another test of $80.”

U.S. oil inventories probably rose 1.5 million barrels last week from 339.9 million in the week ended Oct. 23, based on the average estimate of eight analysts surveyed by Bloomberg News. It would be the fourth consecutive weekly increase. All eight analysts forecast an increase.

Distillate supplies probably fell 600,000 barrels from 167.8 million. Five analysts said stockpiles dropped and three said they rose. U.S. gasoline inventories probably climbed 830,000 barrels last week from 208.6 million the week before, according to the survey. Six analysts forecast an increase and two a decline.

Oil Bets

Hedge-fund managers and other large speculators increased their bets on rising oil prices to a 19-month high 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, climbed 47 percent to 109,619 contracts in the week ended Oct. 27, the commission said Oct. 30. That’s the highest since March 14, 2008.

Brent crude for December settlement climbed $1.35, or 1.8 percent, to $76.55 a barrel on the London-based ICE Futures Europe exchange.

Oil volume in electronic trading on the Nymex was 497,787 contracts as of 3:18 p.m. in New York. Volume totaled 628,446 contracts Oct. 30, 10 percent higher than the average over the past three months. Open interest was 1.24 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.