Oil traded near a 27-month high after growth in US and European manufacturing bolstered speculation the economic recovery would strengthen fuel demand.
Futures advanced 0.2 percent on Monday after the Institute for Supply Management’s US factory index climbed to the highest in seven months. European manufacturing also grew more than estimated, powered by an export-led expansion in Germany, the region’s largest economy.
US crude inventories probably fell a fifth week, a Bloomberg News survey showed.
“In the US and euro area, people are looking for any signs of recovery and for that to flow on to demand,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd in Melbourne, Australia.
The manufacturing data “would have had a positive impact. We’re looking at crude prices in the US$91 to US$92 a barrel range,” he said.
Crude for delivery next month was at US$91.47 a barrel in electronic trading on the New York Mercantile Exchange, down US$0.08, at 3:26pm Singapore time yesterday. On Monday, the contract rose US$0.17 to US$91.55, the highest settlement since Oct. 3, 2008, after peaking at US$92.58.
The US factory index climbed to 57 last month from 56.6 in November. A reading greater than 50 points to expansion.
Construction spending in the nation, the world’s biggest oil user, rose in November for a third month, boosted by US federal government projects, the US Commerce Department said on Monday.
Factory activity in the eurozone increased to 57.1 from 55.3 the previous month, London-based Markit Economics said. That’s higher than the 56.8 reported earlier for last month.
Hedge funds have raised bullish bets on crude to the highest level in more than four years on speculation that futures will continue to climb as the US economy recovers. Oil rallied 15 percent last year, adding to a 78 percent surge in 2009.
The funds and other large speculators increased net-long positions, or wagers on rising prices, by 4.6 percent in the seven days ended Dec. 28, according to the US Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the biggest total in records going back to June 2006.
Crude has advanced as US stockpiles shrink, signaling increased demand. Inventories are expected to have dropped for a fifth week last week, the longest decline since July 2009, -according to a Bloomberg News survey before an US Energy Department report today. Supplies fell 1.75 million barrels from 339.4 million in the week ended Dec. 31, based on the median estimate of eight analysts.
Gasoline stockpiles probably increased 50,000 barrels from 214.9 million, the survey showed. Distillate fuel inventories, including heating oil and diesel, may have climbed 625,000 barrels from 161 million. The industry-funded American Petroleum Institute, which collects stockpile information on a voluntary basis, was to issue its data yesterday.
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