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WTI Crude Halts Longest Drop Since September as Equities Surge

Jan. 7 (Bloomberg) -- West Texas Intermediate crude halted its longest run of declines since September after equities rose as German unemployment fell for the first time in five months.

Futures advanced as much as 0.8 percent, ending a five-day losing streak. The German data signaled increased confidence by companies in Europe’s largest economy. WTI also climbed on the coldest U.S. weather in almost 20 years and forecasts that a government report tomorrow will show that the nation’s crude supplies fell for a sixth week. Brent oil in London gained on clashes between Iraq’s government and Al-Qaeda-linked militants.

“We continue to see signs of a general recovery of the economy,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “When it gets cold, demand for energy goes up. There are a number of factors at work now that are bullish for crude demand.”

West Texas Intermediate crude for February delivery increased 63 cents, or 0.7 percent, to $94.06 a barrel at 11:54 a.m. on New York Mercantile Exchange. The volume of all futures traded was 8.9 percent lower than the 100-day average.

Brent for February settlement rose 88 cents, or 0.8 percent, to $107.61 a barrel on the ICE Futures Europe exchange. The volume of all futures traded was 11 percent above the 100- day average.

The European benchmark traded at a $13.55 premium to WTI. The spread widened for a fifth day yesterday to close at $13.48.

The number of people out of work in Germany decreased by a seasonally adjusted 15,000 to 2.965 million, the Nuremberg-based Federal Labor Agency said today. Euro-area inflation slowed to 0.8 percent, a separate report from the European Union’s statistics office in Luxembourg showed.

Shrinking Deficit

The trade deficit in the U.S. shrank more than forecast in November as oil imports dropped to the lowest level in three years and exports rose to a record. The gap slipped 12.9 percent to $34.3 billion, smaller than projected by any economist surveyed by Bloomberg and the least since October 2009, figures from the Commerce Department showed today in Washington.

The German employment data helped spur a rebound in stocks. The Standard & Poor’s 500 Index rose 0.6 percent and the Dow Jones Industrial Average gained 0.7 percent.

“Equities are up, and oil has halted its slide,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “There’s high correlation between moves in equities and oil.”

Record Lows

The frigid air that set records across the Midwest may deliver the coldest day across the U.S. in almost 20 years by a measure of heating demand. Yesterday’s low in Chicago reached a record for the date of minus 16 degrees Fahrenheit (minus 27 Celsius), beating the mark of minus 14 set in 1884 and 1988, according to the National Weather Service. Today, New York’s high will struggle to reach 10 degrees, a day after hitting 50.

The Energy Information Administration will report tomorrow that crude inventories decreased 3 million barrels last week, according to the median of nine analyst estimates in a Bloomberg survey. The respondents projected that stockpiles of gasoline and distillate fuel, a category that includes diesel and heating oil, increased in the seven days ended Jan. 3.

“We’re looking for another crude-supply decline in tomorrow’s report,” Yawger said. “Refineries are running at a pretty high level, so it’s being turned into fuel. Gasoline and distillate supplies probably rose.”

Iraqi Unrest

Sunni Muslim fighters in Anbar province vowed to fight off an effort by government forces to regain control of towns that Prime Minister Nouri al-Maliki says are under the sway of al- Qaeda. Iraq pumped 3.2 million barrels of crude a day in December, making it the second-largest producer in the Organization of Petroleum Exporting Countries, according to a Bloomberg survey.

Most Iraqi crude production occurs in the Shiite areas of Southern Iraq and Kurdish region in the north, with little in the Sunni Arab center of the country.

“The proximate cause of the move higher is the deteriorating security situation in Iraq,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Very rarely does the market trade lower more than five days. We’re consolidating after a big selloff.”

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