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Oil Gains a Fourth Day After European Pledge to Contain Debt

Publish Date 2011-10-10
Oct. 10 (Bloomberg) -- Oil climbed for a fourth day in New York as investors bet that fuel demand may increase after a pledge by Europe to contain its sovereign-debt crisis and signs of an economic recovery in the U.S.

Futures rose as much as 1.2 percent after the biggest weekly gain in seven months. German Chancellor Angela Merkel and French President Nicolas Sarkozy gave themselves three weeks to stamp out the European crisis. U.S. employers added more workers in September than forecast, a report showed Oct. 7. OPEC members are likely to keep their output target for oil unchanged when they meet in December, according to Iran’s representative.

“We’ve been pricing a disaster in Europe, a double-dip recession in the U.S. and the slowing in Chinese growth,” Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney, said by phone today. “We’re starting to get evidence that we’ve been pricing the risk far too aggressively. I wouldn’t say that people are getting optimistic, but they’re taking back some of the pessimism, and oil is a clear beneficiary.”

Crude for November delivery advanced as much as 99 cents to $83.97 a barrel in electronic trading on the New York Mercantile Exchange and was at $83.53 at 5:19 p.m. in Sydney. West Texas Intermediate last week gained 4.8 percent, the biggest increase since the period ended March 4. Prices are down 9 percent this year.

‘Broken Clear’

“Technically, it’s starting to look quite interesting, because it looked as though we were going to return in West Texas terms to that $72 to $80 zone,” McCarthy said. “We’ve now broken clear of that, and it’s suggesting a bounce on the charts at least up into the low $90s a barrel.”

Oil’s moving average convergence-divergence, a technical indicator, showed positive price momentum on Oct. 7 for the first time in almost three weeks. Investors typically look for positive momentum to sustain buying of contracts.

Brent oil for November was at $106.06 a barrel, up 18 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.53 to New York crude, compared with a record of $26.87 on Sept. 6.

Merkel and Sarkozy told reporters in Berlin yesterday they will deliver a plan by Nov. 3 to recapitalize banks, get Greece on the right track and fix Europe’s economic governance. European leaders will do “everything necessary” to ensure that banks have adequate capital, Merkel said.

Saudi Output

U.S. payrolls rose by 103,000 after a revised 57,000 gain in August, the Labor Department said Oct. 7. The median forecast in a Bloomberg News survey of economists called for an increase of 60,000. The jobless rate held at 9.1 percent. Reports last week showed growth accelerated in China’s services industries.

Oil producers and consumers are satisfied with the current price level for crude, said Iran’s Governor to the Organization of Petroleum Exporting Countries, Mohammad Ali Khatibi, according to Shana, the Iranian Oil Ministry’s news website. OPEC is responsible for 40 percent of global oil output.

There’s no excess supply in world oil markets and Saudi Arabia has been adjusting output to match fluctuating demand over recent months, Oil Minister Ali Al-Naimi said Oct. 8. The kingdom is OPEC’s biggest producer.

Hedge funds cut bullish bets on oil for a third week as concern that slowing economic growth will reduce fuel demand. The funds and other large speculators reduced wagers on rising prices by 5.5 percent in the week ended Oct. 4 to the lowest level since Aug. 23, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Oct. 7.

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