(For Bloomberg fair value curves, see CFVL <GO>.)
Dec. 2 (Bloomberg) -- West Texas Intermediate crude climbed as U.S. manufacturing unexpectedly advanced and Chinese growth surpassed projections, signaling greater fuel demand in the world’s biggest oil-consuming countries.
Prices increased 1.2 percent after the Institute for Supply Management reported its factory index rose to 57.3 in November from 56.4 a month earlier. Manufacturing picked up in China, the euro area and the U.K. last month. WTI’s discount to Brent oil traded in London grew, approaching the steepest in eight months.
“Crude oil is up on the strength of the manufacturing indices,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There was growth in the U.S., China, the U.K. and other countries, which is supportive for energy demand going forward, especially for transportation fuels.”
WTI crude for January delivery advanced $1.10 to settle at $93.82 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 16 percent below the 100-day average at 2:50 p.m. Prices dropped 3.8 percent in November, a third monthly decline.
Brent for January settlement rose $1.76, or 1.6 percent, to end the session at $111.45 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since Oct. 10. Futures touched $112 for the first time since Oct. 10 and reached $112.34, the highest intraday price since Sept. 13.
The European benchmark traded at a $17.63 premium to WTI, up from $16.97 on Nov. 29. The spread closed at $19.01 on Nov. 27, the widest level since March 7.
“Brent got through the October high today but couldn’t go much higher,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The WTI-Brent spread really blew out last week before coming in a bit and now it’s growing again. It’s a rather boring day for WTI given all the excitement with Brent.”
The U.S. manufacturing index from the Tempe, Arizona-based ISM was forecast to drop to 55.1, based on the median estimate in a Bloomberg survey of 77 economists.
China’s Purchasing Managers’ Index held at 51.4 in November, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday. The index matched the 18-month high in October. A separate gauge today from HSBC Holdings Plc and Markit Economics was 50.8, exceeding all 13 analyst estimates.
China will account for about 11 percent of global oil demand this year, compared with 21 percent for the U.S., according to the International Energy Agency, a Paris-based adviser to developed nations.
Euro-area manufacturing output expanded more than initially estimated last month, led by Germany. Markit said today its index rose to a more than two-year high of 51.6 from 51.3 in October. That compares with an initial estimate of 51.5 for November. In the U.K., the expansion at factories was the strongest since February 2011, according to Markit.
The Organization of Petroleum Exporting Countries is forecast to reaffirm a collective output limit of 30 million barrels a day at its meeting on Dec. 4 in Vienna, said three delegates from the 12-member group. The three delegates spoke to Bloomberg before Saudi Arabian Oil Minister Ali al-Naimi arrived at his hotel in Vienna.
“The market is doing well for the past two years, price is doing well, supply and demand in equilibrium, inventories are in the right position,” al-Naimi told reporters. “The market is in the best condition it can be.”
OPEC crude production dropped to a two-year low in November, led by losses in Saudi Arabia and Nigeria, according to a Bloomberg survey of oil companies, producers and analysts. Output from the 12-member group decreased by 245,000 barrels a day to an average of 30 million last month.
Saudi Arabia and its allies Kuwait, Qatar and the United Arab Emirates will need to produce about 2 million barrels a day less of crude in 2014 to prevent a glut, the Centre for Global Energy Studies predicts. Demand for the group’s crude will decline by about 900,000 barrels a day in 2014 as the U.S. pumps the most in almost a quarter century, the IEA says.
Iran agreed Nov. 24 to restrict nuclear work for six months in exchange for an easing of international sanctions. The nation, once OPEC’s second-biggest member, is producing about 1 million barrels a day less than at the start of 2012.
“OPEC has a real problem on its hands,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “Production is rising faster than demand and the potential return of Iranian barrels will make it even tougher to manage the market. They are starting to face a real nightmare.”
Implied volatility for at-the-money WTI options expiring in January was 18.7 percent, up from 18.5 percent on Nov. 29, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 414,217 contracts as of 2:51 p.m. It totaled 243,641 contracts Nov. 29, the lowest level since Dec. 24. Open interest was 1.63 million contracts, the least since Feb. 11.
--With assistance from Grant Smith in London and Maher Chmaytelli in Dubai. Editors: Richard Stubbe, Dan Stets