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Crude Oil Ends Higher On Supply Concerns

11/16/2012 2:53 PM ET

U.S. crude oil settled sharply higher Friday, on supply concerns with tensions between Israel and the Hamas-controlled Gaza in the Middle East seem to be escalating into a war like situation. This is despite demand growth concerns with worries over the global economy and after an Energy Information Administration weekly oil report showed an increase in U.S. crude stockpiles at the the last week end. For the week, oil gained 0.7 percent.

Investors continued to track the interaction between Democrats and the Republicans to resolve the fast approaching fiscal cliff in January, with impending tax hikes and spending cuts of about $600 billion if a deal is not reached.

Light Sweet Crude Oil futures for December delivery jumped $1.22 or 1.4 percent to close at $86.67 a barrel on the New York Mercantile Exchange Friday.

Crude prices scaled a high of $87.01 a barrel intraday and a low of $85.02.

Yesterday, oil settled lower on demand growth concerns after an Energy Information Administration weekly oil report showed an increase in U.S. crude stockpiles for the last week. Investors also weighed a slew of macroeconomic data out of the U.S. and Europe fueling further fears of global economic growth slowdown.

The EIA on Thursday said U.S. commercial crude oil inventories increased by 1.10 million barrels, while gasoline stocks shed 0.40 million barrels in the weekended November 09. Analysts were expecting crude oil inventories to gain by 1.50 million barrels last week

The dollar index, which tracks the U.S. unit against six major currencies, traded at 81.28 on Friday, up from 81.03 in North American trade late Thursday. The dollar scaled a high of 81.46 intraday and a low of 81.00.

The euro traded lower against the dollar at $1.2725 on Friday, as compared to $1.2782 late Thursday in North America. The euro scaled a high of $1.2784 intraday and a low of $1.2692.

In economic news, the Federal Reserve Bank of Philadelphia report showed an unexpected contraction in regional manufacturing activity in the month of November, due mostly to the disruptive effects of Superstorm Sandy. The Philly Fed said its diffusion index of current activity plunged to a negative 10.7 in November from a positive 5.7 in October, with a negative reading indicating a contraction in regional manufacturing activity. Economists expected the index to edge down to a positive 4.5. The Philly Fed index was at its lowest since coming in at a negative 12.9 in July.

Conditions for New York manufacturers declined at a modest pace in November, the Federal Reserve Bank of New York said in a report on Thursday, with the general business conditions index remaining negative for the fourth consecutive month. The general business conditions index rose to a negative 5.2 in November from a negative 6.2 in October, although a negative reading indicates a continued contraction in regional manufacturing activity. Economists expected the index to climb to a negative 5.0.

The U.S. manufacturing sector also felt the impact of Superstorm Sandy, with industrial production dropping 0.4 percent in October, the Federal Reserve said. October was shaping up to be a strong month in terms of factory output until key manufacturing regions were ground to a halt by Sandy. The Fed estimates the storm lowered total output by 1 percentage point. September production was revised down to a 0.2 percent gain from the initial estimate of a 0.4 percent increase.

Elsewhere, eurozone trade surplus increased to 9.8 billion euros in September, Eurostat reported. The surplus totaled 5.2 billion euros in August and 1.7 billion euros in September 2011. On a seasonally adjusted basis, exports dropped 1.1 percent in September month-on-month, partially offsetting a 3.3 percent rise in August. Likewise, imports slipped 2.7 percent after increasing 2.3 percent.

Meanwhile, the euro area current account surplus declined to 0.8 billion euros in September from 10.9 billion euros in August, the European Central Bank said.

by RTT Staff Writer

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