(For Bloomberg fair value curves, see CFVL <GO>)
Dec. 20 (Bloomberg) -- Brent crude headed for a weekly increase on speculation that the Federal Reserve’s plans to reduce stimulus indicate the economic recovery is gaining strength and will support fuel consumption.
Brent futures rose 0.5 percent in London and advanced 1.8 percent this week. The Federal Reserve, which said Dec. 18 its monthly bond-buying will slow amid improved prospects for the job market, will probably reduce purchases in $10 billion increments over the next seven meetings, according to a Bloomberg News survey of economists. West Texas Intermediate prices will probably decline next week amid ample U.S. crude inventories, a separate Bloomberg survey showed.
“Improvement in the U.S. economy is clear,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a London-based consultant. “That should offset any small negative impact from tapering. It has taken a few months for the market to acknowledge the upside surprise from global oil demand.”
Brent for February settlement rose 53 cents to $110.82 a barrel on the London-based ICE Futures Europe exchange at 1:35 p.m. London time. The European benchmark crude was at a premium of $11.94 to West Texas Intermediate, compared with $11.46 yesterday. The volume of all futures traded was about 30 percent below the 100-day average.
WTI for February delivery slid as much as 39 cents to $98.65 a barrel in electronic trading on the New York Mercantile Exchange, and was at $98.88 at 1:35 p.m. London time. The January contract expired yesterday after climbing 97 cents to $98.77, the highest level since Oct. 21. Front-month prices are up 2.4 percent this week.
The Fed is trimming monthly bond purchases to $75 billion from $85 billion, starting in January, Chairman Ben S. Bernanke said on Dec. 18. The central bank will continue to curb the program, eventually ending it in December, 2014, according to the median forecast in a Bloomberg survey of 41 economists. The U.S., the world’s largest oil consumer, will account for about 21 percent of global demand this year, according to data from the International Energy Agency in Paris.
WTI’s advance is stalling along its 200-day moving average, according to data compiled by Bloomberg. The threshold, at about $98.82 a barrel today, is where futures halted an advance last week, data compiled by Bloomberg show. Sell orders tend to be clustered near technical-resistance levels.
WTI crude will probably fall next week, according to 15 of 32 analysts and traders, or 47 percent, surveyed by Bloomberg. Eleven respondents, or 34 percent, projected futures will be little changed and six said prices will increase. Last week, 52 percent in the survey predicted a decline.
Saudi Arabia’s oil minister, Ali al-Naimi, is in Doha, Qatar, to attend a meeting of the Organization of Arab Petroleum Exporting Countries starting tomorrow. Saudi Arabia is the world’s largest oil exporter. Al-Naimi, speaking in Vienna on Dec. 3, said that oil “demand is great” and “economic growth improving.”
OAPEC has 11 members, eight of which also are in the Organization of Petroleum Exporting Countries. Egypt, Libya, Kuwait, Qatar, Iraq, Saudi Arabia, Algeria and the United Arab Emirates belong to both groups.
--Editors: Dan Weeks, Rachel Graham