WTI Oil Set for First Weekly Gain in Six on Economy; Brent Rises

Aug 29, 2014 8:07 am ET

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Aug. 29 (Bloomberg) -- West Texas Intermediate headed for the first weekly gain in more than a month as U.S. economic growth beat estimates, bolstering the demand outlook in the world’s largest oil consumer. Brent rose in London.

Futures climbed as much as 0.6 percent in New York and are up 1.3 percent since Aug. 22, breaking the longest run of weekly losses since November. The U.S. economy expanded at a 4.2 percent annualized rate in the second quarter, the Commerce Department said, compared with a 3.9 percent increase predicted in a Bloomberg News survey. The U.S. and European powers joined Ukraine in condemning what they said were incursions by Russia as the government in Kiev sought to counter a rebel offensive.

“The biggest impact is coming out of the U.S.,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by phone. “It’s a good sign that the U.S. is recovering. In the last weeks the price action has been mainly driven by the fundamental situation, and not reacting much to geopolitical factors. There’s less of a fear factor.”

WTI for October delivery advanced as much as 60 cents to $95.15 a barrel in electronic trading on the New York Mercantile Exchange, trading for $94.83 at 12:50 p.m. London time. The volume of all futures traded was about 24 percent above the 100- day average for the time of day. Prices have declined 3.4 percent in August, a second monthly loss.

Brent for October settlement rose as much as 55 cents, or 0.5 percent, to $103.01 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $7.91 premium to WTI, compared with $8.64 at the end of last week.

U.S. Economy

Gross domestic product growth, propelled by the biggest gain in business investment in more than two years, accelerated from an initial projection of 4 percent, the Commerce Department reported yesterday. Investment increased at an 8.1 percent annualized rate, the most since the first three months of 2012.

The U.S. will account for about 21 percent of global oil demand this year, almost double that of China, the second- largest consumer, forecasts from the International Energy Agency in Paris show.

In Ukraine, fighting in the easternmost regions, which the United Nations says has claimed more than 2,000 lives in the past five months, is spreading. The escalation prompted calls by the European Union to threaten Russian President Vladimir Putin with more sanctions, even as it stopped short of calling the actions an “invasion.”

Ukrainian troops are on the defensive after weeks of advances that pushed pro-Russian separatists back to their strongholds of Donetsk and Luhansk. Russia is masterminding the counter-attacks, with more than 1,000 of its forces operating in Ukraine to man sophisticated weapons and advise the rebels, according to the North Atlantic Treaty Organization.

WTI may increase next week amid worsening tension between Ukraine and Russia, a Bloomberg survey of analysts and traders shows. Fourteen of 37 respondents, or 38 percent, forecast futures will rise through Sept. 5, while 12 expect prices to fall.

--With assistance from Heesu Lee in Seoul.