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  • September 16th, 2011

Crude Oil Heads for Fifth Weekly Advance in London on European Debt Plan

Oil headed for a fifth weekly gain in London, the longest winning streak since March, on bets that a plan to contain Europe’s debt crisis will help shore up fuel demand.

Brent advanced after the European Central Bank said it worked with the U.S., U.K., Japan and Switzerland to extend three-month loans to euro-area banks. The 17 euro nations accounted for about 12 percent of global oil demand in 2010, according to Bloomberg calculations based on BP Plc’s Statistical Review of World Energy. U.S. crude stockpiles dropped last week, a Sept. 14 Energy Department report showed, after Tropical Storm Lee closed platforms in the Gulf of Mexico.

“European politicians seem to be doing whatever they can to calm the market, and to avoid further speculation about debt- burdened countries,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “Hurricane activity in the Gulf of Mexico has picked up lately and caused a short-term draw-down in stocks.”

Brent oil for November settlement gained as much as $1.50, or 1.3 percent, to $113.80 a barrel on the London-based ICE Futures Europe Exchange and was at $112.75 at 11:13 a.m. London time. The October contract rose $2.94 to $115.34 yesterday, when it expired.

Crude for October delivery on the New York Mercantile Exchange was down 34 cents at $89.06 a barrel. The contract yesterday rose 49 cents to $89.40. Prices are up 2.1 percent this week, its fourth straight gain, and 19 percent higher in the past year.

‘Coiled Spring’

The European benchmark was at a premium of $23.51 to West Texas Intermediate November futures, compared with a record $26.87 on Sept. 6 based on front-month settlement prices. Brent, which has risen 45 percent in the past year and 1.6 percent this week, may be headed for $150 a barrel, according to chart analysis by Citigroup Inc.

“Crude oil looks to be a coiled spring,” Tom Fitzpatrick, the bank’s New York-based chief technical analyst, wrote in a research note dated yesterday. A weekly close above $117.60 a barrel “would suggest a breakout and the possibility of a move toward at least $150.”

Oil stockpiles in developed nations fell below their five- year average in July, the first time since the 2008 recession, and were expected to have fallen further in August, the International Energy Agency said on Sept. 13.

Supply Premium

The lack of supply from Libya and production outages in areas such as the North Sea caused inventories to fall in Europe and North America, while Asian companies held less crude than normal, the IEA said in its monthly report.

Libya will resume partial crude exports within three or four days, an official from the nation said in Doha yesterday. The country, holder of Africa’s largest oil reserves, will produce about 700,000 barrels a day by the end of this year and an estimated 1.6 million barrels a day by the end of 2012, Abdulla Saudi told reporters yesterday in the Qatari capital.

“Reports of Libya resuming partial crude exports next week could weigh on Brent, with some of the tight supply premium removed from prices,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today.

Fighting in the African nation since February has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.

Ichimoku Cloud

U.S. crude inventories slid 6.7 million barrels to 346.4 million last week as Tropical Storm Lee closed platforms in the Gulf of Mexico, which accounts for 27 percent of U.S. supply, according to the Energy Department report. As much as 61 percent of production was shut, the Bureau of Ocean Energy Management, Regulation and Enforcement said on its website.

New York crude may fall next week on concern that Europe’s debt crisis will remain unresolved, a Bloomberg News survey showed. Eighteen of 40 analysts, or 45 percent, forecast oil will decline through Sept. 23, while 13 respondents, or 33 percent, predicted prices will increase.

The decline may be limited to around $85.60 a barrel, the second of two leading-span lines that define the boundaries of an “ichimoku cloud” on the weekly chart, according to data compiled by Bloomberg. The cloud is an area where buy orders may be clustered. Investors tend to sell contracts when prices breach technical-support levels.


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