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Oil rises as Wall Street buying trumps China concern
NEW YORK |
NEW YORK (Reuters) - Brent oil rose on Tuesday, turning higher after hitting a one-week low, as strong bank earnings lifted markets and outweighed pressure from weak Chinese economic data.
U.S. crude outpaced Brent's gains as part of an unwinding of the spread between the two major oil benchmarks, sending Brent's premium to U.S. oil down to less than $23 a barrel after it hit a record $28.10 on Friday.
Several big market players had built large spread positions recently, said Richard Ilczyszyn, senior market strategist for MF Global in Chicago.
"I think this could be an unwind of one of those spreads," he said, adding further support for U.S. crude may be coming from lower inventory levels at the Cushing, Oklahoma delivery point for the U.S. contract.
Brent crude for December rose 99 cents to settle at $111.15 a barrel after falling below the 50-day moving average to touch a seven-day low of $108.45.
U.S. crude for November rose $1.96 to settle at $88.34 a barrel a day before the contract expires.
Crude traded higher in post settlement trade after Britain's Guardian newspaper reported France and Germany have agreed to boost a euro zone financial rescue fund to two trillion euros ($2.76 trillion) as part of a plan to resolve the bloc's debt crisis that should win support at Sunday's EU crisis summit. The crisis has held sway over oil and commodity markets, as well as equities, for more than two months.
Oil has moved with investment flows in and out of riskier assets and trading at a tight negative correlation to the dollar -- which investors buy during risk-averse periods -- in recent sessions.
Prices dipped in early activity after data showed economic growth in No. 2 oil consumer China slowed to 9.1 percent in the third quarter, its third straight quarter of cooling growth and its weakest expansion since early 2009.
Reuters calculations suggest implied oil demand in China rose just 1 percent in September from a year earlier to about 8.9 million barrels per day, its slowest rate of growth so far this year.
Brent turned positive as U.S. stocks rose. Bank earnings, though unspectacular, were strong enough to reassure investors about the sector and overshadow euro zone debt worries and signs of slowing growth elsewhere. .N
Data released late Tuesday by the American Petroleum Institute showed an unexpected drop in crude oil inventories for the week to October 10, with drawdowns in gasoline and distillate supplies exceeding analyst forecasts.
The market will be watching for data from the U.S. Energy Information Administration, due out Wednesday at 10:30 a.m.
(Additional reporting by Gene Ramos in New York, Philip Baillie and Zaida Espana in London and Florence Tan in Singapore; Editing by Marguerita Choy, Bob Burgdorfer, Dale Hudson and Sofina Mirza-Reid)
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