Crude oil rose for the first time in six days as the dollar weakened and some investors took the view that a drop below $79 a barrel made futures attractive to buy.
Oil snapped its longest decline since December as the US currency fell to a four-week low against the yen, increasing the appeal of commodities as an alternative investment. Crude also gained on a report yesterday China's imports may rise 15 per cent this year as the second-largest energy consumer starts building the second phase of its strategic oil reserves.
"On the upside is improved economic headlines from US and China," said Gordon Kwan, the head
of regional energy research at Mirae Asset Securities in Hong Kong. "On the other hand is Opec spare capacity. Oil will be trading in the range between $79 to $83."
Crude oil for February delivery climbed as much as 68 cents, or 0.9 per cent, to $78.68 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.12 at 3.07pm Singapore time. Futures dropped 5.7 per cent last week, the first weekly decline in five, after US fuel supplies rose.
Yesterday's trades will be combined with today's because of the Martin Luther King Jr holiday in the US.
February futures, which settled at $78 a barrel on January 15th, expire tomorrow. The more widely traded March contract was at $78.48, up 11 cents, at 3.10pm Singapore time. It previously gained as much as 66 cents, or 0.8 pe rcent, to $79.03.
"Given the outlook for demand and given what's happened with supply there is always going to be investors willing to buy in around the mid- to high-$70s," said Ben Westmore, a minerals and energy economist at National Australia Bank in Melbourne. "That is what you're seeing today, a little bit of buying on weakness."
The dollar fell before reports this week that may show US building permits rose at a slower pace and manufacturing in the Philadelphia region fell, prompting speculation the Federal Reserve will keep interest rates near zero to sustain economic growth.
The US currency traded at 90.45 yen as of 2.24pm in Tokyo from 90.78 yesterday in New York, after slipping to 90.35, the lowest since December 21st. It was little changed against the euro after rising to $1.4384 yesterday.
"A softer US dollar provides some support to prices," said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. "The oil market needs some real hard supply-demand indications to really forge ahead in 2010."
Qatar's energy minister Abdullah bin Hamad al-Attiyah said yesterday the Organisation of Petroleum Exporting Countries probably won't raise output this year because the market is sufficiently supplied.
Opec, responsible for about 40 per cent of global oil supply, started a record production cut late in 2008 in response to the sharpest demand drop since the 1980s. The group's adherence to output targets has since waned as consumption revives and prices gain. Opec is scheduled to meet March 17 in Vienna.
Temperatures in the US northeast, which consumes four- fifths of the country's heating oil, will probably be above normal through January 28th, according to the National Weather Service.
Oil rallied 4.3 per cent in the first 10 days of 2010 as demand for heating fuels climbed during a cold snap.
Brent crude oil for March settlement was at $76.83 a barrel at 3.08pm Singapore time. It earlier rose as much as 19 cents, or 0.3 per cent, to $77.29 a barrel on the London-based ICE Futures Europe exchange.
Bloomberg
