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Oil Gains Most In Five Months On Spain Bailout, China

By on June 11, 2012

Oil rose the most in more than five months in New York on speculation fuel demand will increase after Spain requested a European bailout to shore up its banks and China’s imports of crude climbed to a record.

Futures advanced as much as 3 percent, the biggest gain since Jan. 3. Spain will seek 100 billion euros ($126 billion) from euro-area nations, Economy Minister Luis de Guindos told reporters in Madrid yesterday. China, the world’s second-biggest crude consumer, increased imports of the commodity in May as costs fell, according to customs data. OPEC may maintain output quotas to keep prices at current levels when the oil cartel meets this week, a Bloomberg News survey showed.

“There was a big gain after the announcement of the relief for Spanish banks as some of the uncertainty in Europe is disappearing,” said Tetsu Emori, a commodity fund manager at Astmax Co. Ltd. in Tokyo. “It seems China trade is getting healthy again. That’s pushing up oil and commodity prices.”

Crude for July delivery increased as much as $2.54 to $86.64 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.11 at 1:50 p.m. Singapore time. The contract rose 1.1 percent last week to $84.10, the first weekly gain in six. Prices have fallen 13 percent this year.

Brent for July settlement climbed $2.11, or 2.1 percent, to $101.58 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $15.46 a barrel, compared with $15.37 on June 8.

China Imports

Oil in New York rebounded as a technical indicator showed the longest stretch of so-called overselling on record, according to data compiled by Bloomberg. On the daily chart, the 14-day relative strength index was below 30, signaling prices have fallen too quickly, every day for the past four weeks. Investors typically buy contracts when the reading is below that level. The RSI was at 34.87 today.

China imported a net 25.3 million metric tons of crude in May, or 5.98 million barrels a day, up 10 percent from April, the customs data showed yesterday. The previous record was 5.87 million barrels a day in February. Purchases cost an average of $120 a barrel, compared with about $123 in April, the data showed.

The nation’s sales of passenger cars rose 23 percent to 1.28 million units last month, the China Association of Automobile Manufacturers said June 9. That beat the 1.2 million average of seven analyst estimates compiled by Bloomberg.

‘Positive Impact’

“A significant chunk of extra annual demand for oil has been coming from China,” Giyas Gokkent, group chief economist at National Bank of Abu Dhabi PJSC (NBAD), said by e-mail yesterday. “Record oil imports will definitely have a positive impact on prices.”

Spain’s rescue request followed weeks of escalating concern that bad loans at its banks might overwhelm public finances. Brent oil, a benchmark price for more than half the world’s crude, has fallen 21 percent since March 1 amid speculation Europe’s debt crisis will derail the economic recovery and curb fuel demand.

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s crude, will keep its official daily production ceiling at 30 million barrels a day when it meets June 14 in Vienna, according to all 20 traders and analysts surveyed by Bloomberg. That contrasts with the cuts agreed on at every meeting in the past 10 years that coincided with a price drop of more than 10 percent in the preceding three months, data compiled by Bloomberg show.

Iran, Venezuela

“We’re at levels that OPEC wants to support, and investors will probably also support prices around here,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong. “We’d see some bargain hunters if we saw a significant sell off.”

Iran and Venezuela have criticized other members of the cartel for producing more than the existing quota. OPEC pumped 31.85 million barrels a day last month, 1.85 million more than the limit agreed to at the last meeting in December and 950,000 more than will be needed in the third quarter, according to the International Energy Agency.

Venezuela is concerned about members’ non-compliance with the ceiling and will address the issue during the meeting, President Hugo Chavez told reporters on June 9. Venezuela continues to believe that $100 a barrel is a “fair price” for oil, he said.

IAEA ‘Spies’

“It isn’t right” that Saudi Arabia, Kuwait and the United Arab Emirates are seeking to replace Iranian crude on global markets, said Iran’s governor to OPEC, Mohammad Ali Khatibi, according to Press TV yesterday. Iran is under a series of international financial and trade sanctions aimed at curbing its nuclear program and a European Union embargo on Iraniancrude oil is set to come into force on July 1.

Diplomats from China, France, Germany, Russia, the U.K. and the U.S. meet their Iranian counterparts in Moscow on June 18 to June 19 to discuss the atomic program, which the West says is a cover for nuclear weapons development and Iran says is peaceful. It will be the third round of talks in three months.

The United Nations’ nuclear agency and Iran failed to agree on a deal that would allow wider inspections of alleged nuclear facilities inside the Persian Gulf nation following an eight- hour meeting in Vienna June 8.

The Islamic Republic won’t let International Atomic Energy Agency inspectors visit its Parchin military complex, Tehran Times reported yesterday, citing Avaz Heidarpour, a member of Iran’s parliament. The legislature won’t allow military sites “to be inspected by Western spies,” he said.

U.S. Gasoline

Money managers, including hedge funds, decreased bullish oil wagers for a fifth week in the period ended June 5. Net-long positions, or wagers prices will rise, fell by 3,535, or 2.6 percent, to 133,049 futures and options combined, according to the Commodity Futures Trading Commission’s Commitments of Traders report on June 8.

The average price of regular gasoline at U.S. filling stations declined 15.9 cents in the past three weeks to $3.6243 a gallon, according to Lundberg Survey Inc. The survey covers the period ended June 8 and is based on information received from about 2,500 stations by the Camarillo, California-based company. The price is down 11.62 cents from a year earlier. The highest average this year was $3.9671 during the two weeks ended April 6.

Gasoline on the New York Mercantile Exchange has fallen 20 percent since reaching a 2012 closing high of $3.4166 on March 26. Futures for July delivery rose as much as 2.5 percent to $2.7523 a gallon today.