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Oil Trades Near Four-Month High as Japan Pledges More Stimulus

Published: January 22, 2013 | 8:56 am
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Oil traded near a four-month high in New York as Japan’s central bank said it will expand asset purchases to lift the world’s third-biggest crude consumer out of its third recession in five years. Brent prices advanced.

West Texas Intermediate futures were little changed after settling Jan. 18 at the highest since September. There was no floor trading yesterday because of the Martin Luther King Jr. Day holiday in the U.S. The Bank of Japan (8301) will introduce open- ended asset purchases from January 2014 to boost the economy. Euro-area finance ministers yesterday approved a payout of 9.2 billion euros ($12.3 billion) to Greece this month.

Quantitative-easing programs by the BOJ are “a short- to medium-term plus for world growth and commodities, including oil,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The broad view with Europe is that the immediate risks that were before us in the middle of last year have been removed now that Greece has been given liquidity support.”

WTI for February delivery, which expires today, was at $95.60 a barrel, up 4 cents, in electronic trading on the New York Mercantile Exchange at 3:21 p.m. Singapore time. The more active March contract was unchanged at $96.04. Yesterday’s transactions will be booked with today’s trades for settlement purposes. Front-month futures rose 7 cents to $95.56 on Jan. 18, the highest close since Sept. 17.

Brent oil for March settlement on the London-based ICE Futures Europe exchange increased as much as 43 cents, or 0.4 percent, $112.13 a barrel. The average volume of all contracts was 5.5 percent higher than the 100-day average. The European benchmark crude was at a premium of $15.95 to New York futures. The spread was $15.16 on Jan. 17, the narrowest since July 24.

Brent Forecast
Brent is forecast to trade between $107 and $118 a barrel in the first quarter of this year, barring unexpected supply disruptions in North Africa and Syria, Gordon Kwan, the head of research at Mirae Asset Securities Hong Kong Ltd., said in a report dated today.

The BOJ will purchase about 13 trillion yen ($145 billion) of assets per month while setting a 2 percent inflation target, the bank said in Tokyo today. The nation hasn’t had sustained price gains of that size in two decades. Japan accounted for 5 percent of global crude demand in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. consumed 21 percent and China used 11 percent.

Oil’s advance in New York may stall as a technical indicator shows futures have climbed too quickly for further gains to be sustainable. The 14-day relative strength index is above 71 for a third day, according to data compiled by Bloomberg. A reading higher than 70 signals a market is overbought and may drop.

Libya Output
WTI declined 7.1 percent in 2012 as the U.S. shale boom deepened a supply glut at Cushing, Oklahoma, America’s largest storage hub and the delivery point for New York futures. That left it at an average discount of $17.47 a barrel to Brent last year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, advanced 3.5 percent last year.

Libya, which holds Africa’s biggest crude reserves, is pumping 1.1 million barrels a day of oil and is targeting output of 1.7 million barrels daily, Oil Minister Abdulbari Al-Arusi said in an interview in Tripoli yesterday. The country’s daily output may rise to 2 million barrels in two years, he said.

businessweek

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