Oil Climbs From Four-Month Low on Speculation Slump Exaggerated

Oil rose from the lowest in almost four months in New York amid speculation yesterday’s 4.6 percent slump was exaggerated and on signs Chinese demand will increase.

Futures climbed as much as 0.8 percent after plunging the most since May 11 yesterday. The contract traded below the lower Bollinger Band, a technical indicator which may signal prices have fallen too far. Brent crude may stay “well above” $100 a barrel in the second half of the year on Chinese demand growth, Mirae Asset Securities Ltd. said.

Oil is at “the lowest end of the range,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted the New York contract will average $100 a barrel this year. “We have been down here a couple of times and on each occasion we have bounced off this level.”

Crude for July delivery gained as much as 73 cents to $95.54 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.12 at 3:23 p.m. Singapore time. The contract yesterday fell $4.56 to $94.81, the lowest since Feb. 22. Prices are 22 percent higher the past year.

New York futures have traded in a range of $93.57 to $113.93 since Feb. 22, when Libyan leader Muammar Qaddafi said in a televised address he would fight an uprising until his “last drop of blood.” The unrest has cut the nation’s oil production almost 90 percent since January, according to Bloomberg estimates.

China Demand

Brent oil for August delivery rose $1.14, or 1 percent, to $114.15 a barrel on the London-based ICE Futures Europe exchange. It fell $6.34, or 5.3 percent, yesterday to $113.01.

China’s demand growth may keep Brent crude “well above’” $100 a barrel in the second half of the year, Gordon Kwan, head of regional energy research at Mirae Asset in Hong Kong, said in an e-mailed note today.

China may need an extra 1 million metric tons of diesel a month in the third quarter as factories burn the fuel in electricity generators amid a power shortage, said an official with the nation’s largest oil company, PetroChina Co.

The country may face a diesel shortfall as seven major refineries, with a combined capacity of 35.25 million tons a year, will undergo maintenance, Gong Manying, a market research director at PetroChina, said in Beijing today. China’s summer electricity deficit may exceed its most severe in 2004, according to State Grid Corp. of China.

U.S. Economy

Oil tumbled yesterday as manufacturing in the New York region unexpectedly shrank in June and the Energy Department said U.S. fuel demand fell for the first time in five weeks.

The Federal Reserve Bank of New York’s general economic index dropped to minus 7.8, the lowest level since November, from 11.9 in May. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut.

Nationwide industrial production rose less than forecast in May, restrained by a slump in utility output and shortages of auto parts from Japan after the March 11 earthquake disrupted production. Output at factories, mines and utilities rose 0.1 percent, Federal Reserve figures showed. Economists projected a 0.2 percent gain, according to the median estimate in a Bloomberg News survey.

U.S. consumption of distillate fuel, a category that includes diesel and heating oil, tumbled 5.2 percent last week to 3.6 million barrels a day, the lowest level since January, according to the Energy Department.

Crude Inventories

Crude stockpiles fell 3.41 million barrels to 365.6 million, the department said. A 1.8 million-barrel decline was projected, according to the median of 13 analyst responses in a Bloomberg News survey. Gasoline inventories climbed 573,000 barrels, the department said. They were projected to increase 1.05 million barrels, the survey shows.

Stockpiles of oil at Cushing, Oklahoma, the delivery point for the New York-traded West Texas Intermediate grade, slipped 1.14 million barrels to 37.76 million in the week ended June 10, the lowest level since February. Cushing is the terminus of the Keystone pipeline, which carries Canadian oil to the central U.S. and was closed from May 29 to June 5.

TransCanada Corp. has curtailed June and July shipments on its Keystone pipeline by 12 percent, Terry Cunha, a company spokesman, said in an e-mail. It will transport between 400,000 and 450,000 barrels a day, he said in an e-mail. The line was shut twice last month after leaks at pump stations in North Dakota and Kansas.

Bloomberg