LATEST:-Crude Oil Trades Near $71, Snapping Four Weeks of Increases

Thursday, January 7, 2010

By Christian Schmollinger

June 19 (Bloomberg) -- Crude oil snapped four weeks of gains, trading little changed near $71 a barrel in New York, as fuel demand remained weak even as data showed that the global economy may be recovering from the recession.

Oil traded in a $3 range this week after rising 28 percent in the previous four. The index of U.S. leading economic indicators rose in May, the U.S. Commerce Department said yesterday. Petroleum products demand in the U.S., the world’s largest energy user, fell 6 percent over the past four weeks to June 12 from a year ago, the Energy Department said June 17.

“The available data do show that the world is no longer dropping off a cliff,” said Victor Shum, a senior principal at Purvin & Gertz Inc. in Singapore. “The concern is that if you look at oil demand, it hasn’t really turned a corner.”

Crude oil for July delivery was at $71.55 a barrel, up 18 cents, in electronic trading on the New York Mercantile Exchange at 2:43 p.m. Singapore time. Prices have risen 60 percent this year and reached a seven-month high of $73.23 on June 11. Oil prices are poised to fall 0.7 percent this week.

The July contract expires June 22. The more-active August contract was at $72.09 a barrel, up 18 cents, at 2:44 p.m. Singapore time.

Inflation Hedge

Investors have pushed oil higher by buying contracts as an inflation hedge to offset a decline in the dollar.

“We’ve moved quite high at a time the international economy is in a recession,” said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. “Oil prices at $70 are at a solid level.”

Oil has gained 56 percent since April 20 as the dollar index, a measure of the greenback’s value against six other currencies, has had a 6.9 percent drop. The euro has fallen 0.7 percent against the U.S. currency this week.

Crude futures may fall next week on speculation U.S. fuel stockpiles will increase as the recession and rising prices sap consumption, according to a Bloomberg News survey.

Fourteen of 32 analysts surveyed, or 44 percent, said futures will decline through June 26. Thirteen respondents, or 41 percent, forecast that the market will be little changed and five said prices will climb. Last week, 49 percent of analysts said oil would increase.

OPEC Output

Goldman Sachs Group Inc. analysts said yesterday that while some short-term “liquidation risk” is evident in oil markets, they expect “an improvement in fundamentals to begin to take hold in the next several months,” pushing prices to $85 a barrel before the end of the year.

Oil prices at $70 a barrel are satisfactory for producers and consumers, Organization of Petroleum Exporting Countries President JOSE told reporters in Luanda, Angola. Vasconcelos, who’s also the country’s oil minister, said the gain in oil prices is a positive sign for the world economy.

The 12-member group will trim shipments 0.2 percent in the four weeks ended July 2, according to consultant Oil Movements. OPEC will reduce exports in the period to 22.78 million barrels a day, from 22.82 million in the month ended June 6, the Halifax, England-based tanker-tracker said today.

Brent crude for August settlement was at $71.24 a barrel, up 18 cents, on London’s ICE Futures Europe exchange at 2:43 p.m. Singapore time.

Last Updated: June 19, 2009 02:46 EDT


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