By Mark Shenk
Futures climbed as much as 2 percent as the central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland cut the cost of emergency funding for European banks. U.S. companies added 206,000 jobs this month, the most this year, ADP Employer Services said today.
“The announcement of a coordinated intervention to shore up European banks sent the market higher,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “The dark clouds over Europe have been keeping a lid on oil prices, so anything that helps calm the situation there is good for this market.”
Crude oil for January delivery rose 96 cents, or 1 percent, to $100.75 a barrel at 12:14 p.m. on the New York Mercantile Exchange. Futures reached $101.75, the highest level since Nov. 17. Prices have gained 10 percent this year.
Brent oil for January settlement dropped 21 cents to $110.61 a barrel on the London-based ICE Futures Europe exchange.
The central banks reduced the cost of providing dollar funding via swap arrangements. The move is aimed at easing strains in markets and boosting their capacity to support the global financial system, according to a Federal Reserve statement from Washington.
Coordinated Action
“The coordinated central bank action has increased the willingness of investors to go long equities and commodities,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado. “We’re trading on the increase in liquidity, not the fundamentals of the oil market.”
ADP, based in Roseland, New Jersey, was projected to report an advance of 130,000 jobs, according to the median of responses from economists surveyed by Bloomberg News.
“We got a very positive jobs report this morning,” Bentz said. “Anything that points to a stronger economy is good for oil demand.”
The Institute for Supply Management-Chicago Inc. said today its business barometer increased to 62.6 in November from 58.4 the prior month. Economists forecast the gauge would rise to 58.5, according to the median of 56 estimates in a Bloomberg News survey.
Chinese Cut
China will cut the reserve requirement ratio for banks by 0.5 percentage point from Dec. 5, the central bank said on its website today. The move may add 350 billion yuan ($55 billion) to the financial system, according to UBS AG.
The U.S. and China were responsible for 32 percent of global oil demand in 2010, according to BP Plc’s Statistical Review of World Energy released on June 8. The 17 countries using the euro accounted for about 12 percent of world crude consumption last year, BP figures show.
“There’s been a lot of bullish news today,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “We started the day with the reduction in Chinese reserve requirements, that was followed the announcement from the central banks and the ADP jobs numbers. These headlines were enough to fuel today’s rally.”
Futures pared gains after the Energy Department reported U.S. oil supplies rose 3.93 million barrels to 334.7 million in the week ended Nov. 25. Inventories were forecast to rise 50,000 barrels, according to the median of 12 analyst estimates in a Bloomberg News survey.
Supplies of distillate fuel, a category that includes heating oil and diesel, surged 5.53 million barrels to 138.5 million, the biggest increase since January 2009, the report showed. Analysts projected a 1.25 million-barrel decline.
‘Overwhelmed’
“The inventory numbers are being overwhelmed by the global macroeconomic picture,” McAlvany said. “There are times when inventories are very important. This isn’t one of them.”
Price rises were also limited by increasing oil production by members of the Organization of Petroleum Exporting Countries. Output increased 390,000 barrels, or 1.3 percent, to an average 30.355 million barrels a day in November, the most in three years, according to a Bloomberg News survey of oil companies, producers and analysts.
Libyan output rose 155,000 barrels to 500,000 a day this month, the highest level since February, the survey showed. Production had tumbled from 1.585 million barrels a day in January, the last month before an uprising against the government of Muammar Qaddafi disrupted output.
--With assistance from Lananh Nguyen in London. Editors: Margot Habiby, Richard Stubbe
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