Oil Rises the Most in Six Weeks on Weaker Dollar, Equity Gain Share Business Exchange

Nov. 16 (Bloomberg) -- Crude oil rose the most in six weeks as the dollar weakened and the Standard & Poor’s 500 Index strengthened to a 13-month high, bolstering confidence that the global economy and energy demand are recovering.

Oil gained 3.3 percent as the U.S. currency’s drop encouraged the purchase of alternative investments. Stocks climbed after U.S. retail sales increased more than forecast and Asian government leaders pledged to maintain economic stimulus spending. The gross domestic product of Japan, the third-biggest oil consumer, grew at a 4.8 percent pace in the third quarter.

“The dollar is weaker and stocks are up, both of which are helping send prices higher,” said Ric Navy, a broker at BNP Paribas SA in New York. “The funds are still coming in, and that should push the market higher.”

Crude oil for December delivery rose $2.55 to settle at $78.90 a barrel on the New York Mercantile Exchange. It was the biggest gain since Sept. 30. Oil has traded between $74.79 and $82 since Oct. 15. Futures are up 77 percent this year.

“There is going to be continued downward pressure on the dollar, which will be supportive of prices,” said Mike Wittner, head of oil research at Societe Generale SA in London. “We are still in this range that we have been in for three weeks. There are still question marks about demand and inventories.”

The S&P 500 increased 1.3 percent to 1,107.74, after touching 1,113.69, the highest since Oct. 3, 2008. The Dollar Index, which tracks the currency against the U.S.’s biggest trading partners, dropped 0.7 percent to 74.834, after touching 74.679, the lowest since Aug. 8, 2008.

Retail Sales

October retail sales in the U.S. rose 1.4 percent, Commerce Department figures showed today in Washington. Sales were projected to climb 0.9 percent, according to the median estimate of 66 economists in a Bloomberg News survey.

“People are mildly upbeat about the economy, which is helping commodities,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We won’t get out of the recent range until we get some really strong demand or supply data.”

The 21-member Asia-Pacific Economic Cooperation group, which represents 54 percent of the global economy, said in Singapore that it will maintain stimulus measures until there is “durable” growth.

Japan’s growth rate was higher than the forecasts of all 20 economists in a Bloomberg News survey, Cabinet Office figures showed today in Tokyo. It was the second straight advance after the nation’s deepest postwar recession.

“The dollar and investor flow are pushing commodities higher across the board,” said Michael Fitzpatrick, vice president of energy with MF Global in New York. “We are seeing evidence that the stimulus is working as Japan leaves recession. Eventually demand will pick up, pulling us higher.”

Gold Record

Gold futures for December delivery rose $22.50, or 2 percent, to settle at a record $1,139.20 an ounce on the Comex division of New York Mercantile Exchange. Earlier, the metal touched $1,144.20, an all-time high intraday price. The Reuters/Jefferies CRB Index of 19 commodities advanced 2.8 percent to 276.74, the biggest gain since Sept. 30.

Oil dropped 1.4 percent last week as jobless claims in the world’s largest economy increased, fuel stockpiles rose and the nation’s refiners reduced operating rates to a 13-month low.

“There was a pretty extended selloff into late last week,” said John Kilduff, partner at Round Earth Capital, a hedge fund that focuses on food and energy commodity investments. “We’ve come in today with pretty positive economic data here and from Japan. This, coupled with a weaker dollar, is pushing prices higher.”

OPEC Meeting

The Organization of Petroleum Exporting Countries won’t increase its output quotas when it meets in December, Qatar’s energy minister, Abdullah bin Hamad al-Attiyah, told Bloomberg News in Tokyo today.

“I don’t think they will have any reason to change quotas,” said Wittner. “They would like to keep prices where they are, that’s the bottom line.”

OPEC will meet on Dec. 22 in Luanda, Angola, to discuss output targets after agreeing to leave them unchanged at the past three meetings. The group’s compliance with the production cuts slipped to 60 percent in October from 62 percent in September, it said in a report on Nov. 11.

The producer group is “happy” with prices at current levels, according to OPEC’s president, Angolan Oil Minister Jose Maria Botelho de Vasconcelos.

Oil is at a “good level,” he said today at a conference in Abu Dhabi. “I think that the economy can recover at this price” and even $80 a barrel “is not too high,” he said.

Brent crude oil for January settlement climbed $2.45, or 3.2 percent, to end the session at $78.76 a barrel on the London-based ICE Futures Europe exchange.

Oil volume in electronic trading on the Nymex was 532,883 contracts as of 3:05 p.m. in New York. Volume totaled 582,013 contracts on Nov. 13, 3.7 percent higher than the average over the past three months. Open interest was 1.26 million contracts.

Source: Bloomberg