WTI crude heads for third weekly gain as U.S. economy expands

Spending boosts economy

West Texas Intermediate crude traded near the highest price this year, heading for a third weekly gain, as increased spending by U.S. consumers boosted the economy of the world’s biggest oil user.

Futures were little changed in New York after climbing 0.9 percent yesterday to the highest price in a month. U.S. gross domestic product grew at a 3.2 percent annualized pace in the fourth quarter, the Commerce Department said. Crude output from the Organization of Petroleum Exporting Countries dropped to the lowest level in more than two years this month, led by a decline in Angola, according to a Bloomberg News survey.

“The improving global demand scenario is supportive of the energy complex,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney who predicts investors may sell WTI contracts at about $98.50 a barrel. “The most recent indicator was the GDP data from the U.S.”

WTI for March delivery was at $98.17 a barrel, down 6 cents, in electronic trading on the New York Mercantile Exchange at 10:04 a.m. Singapore time. The contract increased 87 cents to $98.23 yesterday, the highest settlement since Dec. 31. The volume of all futures traded was about 52 percent below the 100- day average. Prices are down 0.3 percent in January.

Brent for March settlement fell 5 cents to $107.90 a barrel on the London-based ICE Futures Europe exchange. Prices are down 2.6 percent this month. The European benchmark was at a premium of $9.72 to WTI.

Heating Oil

WTI is up 1.6 percent this week as freezing weather in the U.S. boosts demand for heating fuel. Inventories of distillates shrank by 4.6 million barrels to 116.2 million during the seven days ended Jan. 24, according to the Energy Information Administration, the Energy Department’s statistical arm.

Ultra low sulfur diesel, a proxy for heating oil, rose 3.54 cents, or 1.1 percent, to $3.217 a gallon yesterday on Nymex, the highest settlement since Feb. 14. The February futures contract expires today and was at $3.24 a gallon.

The cold weather that has boosted heating fuel demand may continue. Temperatures from the Midwest to the East Coast will be below normal from Feb. 5 to Feb. 13, according to the National Weather Service’s Climate Prediction Center.

U.S. consumer spending rose the fastest in three years and GDP growth in the second half of the year was the strongest since the six months ended March 2012, Commerce Department data showed. The country will account for about 21 percent of global oil demand this year, according to figures from the Paris-based International Energy Agency.

OPEC Output

Production by the 12-member OPEC in January decreased 151,000 barrels a day to an average 29.888 million from 30.039 million in December, the survey of oil companies, producers and analysts showed. It was the least since June 2011. The December total was revised 84,000 barrels a day higher because of changes to the Saudi Arabian, Kuwaiti and Iraqi estimates.

U.S. crude exports climbed to 202,000 barrels a day in November, the most since April 1999, according to data from the EIA yesterday. Shipments increased from 114,000 barrels a day in October and all deliveries went to Canada, said the EIA.

WTI crude will probably decline next week amid concern that emerging economies will slow, curbing fuel demand, according to a Bloomberg News survey of analysts and traders.

Seventeen of 31 analysts, or 55 percent, forecast crude will decrease through Feb. 7. Eight respondents, or 26 percent, projected prices will gain, and six said there will be little change. Last week, 47 percent of analysts projected a drop.

www.bloomberg.com

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