WTI Trades Near Two-Month High on U.S. Growth, Sudan Violence

Dec 23, 2013 8:18 am ET

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Dec. 23 (Bloomberg) -- West Texas Intermediate traded near a two-month high on signs of stronger economic growth in the U.S., the world’s largest oil consumer, while violence in South Sudan sparked concern supplies may be disrupted.

Futures were little changed in New York after gaining 2.8 percent last week. The International Monetary Fund is raising its outlook for the U.S. economy, Managing Director Christine Lagarde said yesterday. South Sudan evacuated some oil employees and plans a partial shutdown of facilities amid escalating unrest. OPEC won’t need to cut output as global demand growth will absorb additional crude supply, the group’s three biggest producers said on Dec. 21.

“Expectations of increased demand in the U.S.” are buoying crude, said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark. “Oil prices are supported due to the increased unrest in South Sudan,” which “seems to be on the edge of a civil war.”

WTI for February delivery dropped 23 cents to $99.09 a barrel in electronic trading on the New York Mercantile Exchange as of 1:16 p.m. London time. The contract rose 28 cents to $99.32 on Dec. 20, the highest close since Oct. 18. The volume of all futures traded was about 54 percent below the 100-day average. Prices have advanced 7.9 percent this year, set for the fourth annual increase in five years.

Brent for February settlement fell 10 cents to $111.67 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a $12.58 premium to WTI, compared with $12.64 on Dec. 20.

U.S. Growth

The IMF is raising its outlook for the U.S. economy as a budget deal in Washington and the Federal Reserve’s plan to taper bond buying ease doubts that growth will be sustained, Lagarde said in an interview on NBC’s “Meet the Press” broadcast yesterday, without specifying new figures. U.S. gross domestic product expanded in the third quarter at a faster pace than previously estimated, according to Commerce Department data released on Dec. 20.

“People are looking to a pretty solid year of moderate to improving economic growth around the world, led by the U.S.,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “It’s looking as though the market has got the potential to move a bit higher from here.”

Sudan Evacuation

The evacuation in South Sudan is temporary and oil output in the state of Upper Nile is flowing normally, Petroleum Minister Stephen Dhieu Dau said in a phone interview yesterday from Juba, capital of the oil-rich nation that gained its independence from Sudan in 2011.

The landlocked nation has sub-Saharan Africa’s third- largest oil reserves after Nigeria and Angola, according to the BP Statistical Review. It has a capacity to export about 220,000 barrels of a day through pipelines across neighboring Sudan.

The Organization of Petroleum Exporting Countries, which provides about 40 percent of the world’s oil, rejected the possibility of a supply glut next year, ministers from Saudi Arabia, Iraq and Kuwait said after a gathering of Arab crude exporters in Doha. OPEC’s 12 members agreed at a meeting on Dec. 4 to keep their production target unchanged at 30 million barrels a day.

Libya will resort to force if necessary to reopen export terminals that have been closed by protesters, according to Oil Minister Abdulbari al-Arusi. The nation, which holds Africa’s largest crude reserves, is producing 250,000 barrels a day, he said. That’s down from 1.43 million barrels a day in December 2012, data compiled by Bloomberg show.

Hedge funds and other money managers cut bullish bets on Brent crude by the most in almost two months in the week ended Dec. 17, according to ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 91,371 lots in the period, the London-based exchange said today in its weekly Commitments of Traders report. The decrease of 25,774 contracts is the biggest since the week ended Oct. 29.

--Editors: Raj Rajendran, John Deane