Oil Price Rises From 13-Month Low as Governments Pledge Support
By Nesa Subrahmaniyan and Gavin Evans
Oct. 13 (Bloomberg) -- Crude oil prices rose from a 13-month low in New York as governments in the U.S., Europe and Asia pledged to avert a collapse in the financial system while turmoil in credit markets threatens to stall the global economy.
Oil gained for the first time in four days after the 15 nations using the euro agreed to shore up their banks, and Richard W. Fisher, president of the Dallas Fed bank, said the U.S. Federal Reserve will do everything necessary to stabilize financial markets.
``Everybody is waiting to see evidence that these government interventions are having a positive influence, or are at least dampening the global panic,'' said Toby Hassall, a research analyst with Commodity Warrants Australia Pty in Sydney. ``The sentiment in the market is still very poor.''
Crude oil for November delivery rose as much as $3.37, or 4.3 percent, to $81.07 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $79.93 a barrel at 12:23 p.m. in Singapore.
The contract fell $8.89, or 10 percent, to $77.70 a barrel on Oct. 10, the lowest settlement since Sept. 10, 2007. Prices rallied post-settlement as U.S. equity prices climbed from five- year lows late in the session.
New York oil futures dropped 17 percent last week, the biggest one-week decline since the U.S.-led invasion of Iraq in March 2003. Copper, nickel and aluminum also dropped as world equity markets plunged and the International Monetary Fund warned the world was on the cusp of recession.
`Reasonably Priced'
Oil ``looks pretty fair and reasonably priced at the moment,'' Commodity Warrants' Hassall said. ``Markets are pricing in a global slowdown, if not a full-blown recession.''
Brent crude oil for November settlement rose as much as $2.91, or 3.9 percent, to $77 a barrel on London's ICE Futures Europe Exchange, and traded at $75.94 at 12:18 p.m. Singapore time. The contract slumped $8.57, or 10 percent, to $74.09 on Oct. 10, the lowest settlement since Sept. 4, 2007. It dropped 18 percent last week.
The International Energy Agency, an adviser to 28 nations, on Oct. 10 cut its forecast for global oil demand for 2008 to 0.5 percent, the lowest since 1993. Demand next year will rise by 700,000 barrels a day to 87.2 million, 440,000 barrels fewer than the Paris-based agency projected a month earlier.
Oil fell from a record $147.27 in New York in July as demand expectations deteriorated and the weaker outlook in Europe and Asia lifted the dollar, reducing the appeal of commodities priced in the U.S. currency.
Goldman Slashes Forecast
Goldman Sachs Group Inc. lowered its crude oil price forecasts for a second time this year after the global financial crisis deepened.
Goldman reduced its estimate for the U.S. benchmark West Texas Intermediate crude for the fourth quarter to $75 a barrel from $110, and cut its year-end target to $70 a barrel from $115, Goldman's research analysts led by Jeffrey Currie and Giovanni Serio said in a report today.
``We clearly underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand,'' the analysts wrote in the report.
Goldman lowered their forecasts for 2009, with the average for the year reduced to $86 a barrel from $123. The bank's end- 2009 target was cut to $107 a barrel from $125.
Euro Gains
The euro jumped the most in three weeks against the dollar today on the region's bank rescue plan and was another support for oil, Hassall said. Investors would now be looking for signs that confidence is returning to global markets, he said.
``Oil has traded along with equities because there's so much uncertainty in financial markets,'' said Victor Shum, senior principal at energy consultant Purvin & Gertz Inc. in Singapore. ``If the government measures succeed, the severity of the slowdown in oil demand may not be so bad.''
The MSCI Asia Pacific excluding Japan Index added 2.4 percent to 259.93 at 11:46 a.m. in Hong Kong, rebounding from last week's 20 percent tumble. Financial stocks accounted for more than half of today's gain. Standard & Poor's 500 Index futures advanced 2.9 percent.
Australia's S&P/ASX 200 Index rose 5.5 percent to 4,180.10 after dropping 16 percent last week.
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