Oil higher after OPEC output rollover; eyes on China

By Christopher Johnson and Una Galani

LONDON (BestGrowthStock) – Oil rose more than a dollar on Monday in line with other commodities after OPEC agreed to keep output targets unchanged despite a surge in heating fuel demand.

The Organization of the Petroleum Exporting Countries decided on Saturday, as expected, to maintain its production policy and leading member Saudi Arabia said it still favored oil prices between $70 and $80 per barrel.

Oil has surged to above $90 this month as sub-zero temperatures have swept across Europe, the United States and parts of east Asia leading to higher than normal energy consumption for this time of year.

U.S. crude for January rose $1.30 to $89.09 a barrel by 1224 GMT. ICE Brent jumped $1.61 to a high of $92.09.

“What’s happening right now is, I think, support from very cold weather and increasing demand, mainly from Europe,” said Christophe Barret, global oil analyst for French bank Credit Agricole. “Europe will remain very cold.”

Strong Chinese macro-economic data at the weekend helped boost optimism among financial investors for the entire commodities spectrum, said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt, as copper hit a fresh high in London.

Bullish sentiment was underlined by oil price hawk Venezuela, which called at the OPEC meeting for $100 oil and said OPEC should not lift output again through the end of 2011.

Expectations of higher oil prices have drawn investors into U.S. crude oil futures also known as West Texas Intermediate, data from the Commodity Futures Trading Commission shows.

Speculators raised their net long positions in U.S. crude futures to a record high in the seven days to December 7, the day prices hit $90 a barrel for the first time in over two years.

STRONG FUNDAMENTALS

Several reports, including one from the International Energy Agency last week raising its 2011 oil demand growth forecast, have indicated that fundamentals are strong, with oil stocks beginning to fall from historically high levels.

But markets are worried that much of the strength in commodities stems from China, where inflation rose to a 28-month high of 5.1 percent in November, the National Bureau of Statistics said on Saturday.

“The fact is that much higher-than-expected inflation data (in China) is being ignored today but this may change as soon as tomorrow,” Fritsch cautioned.

Chinese authorities have begun to tighten money supply and are expected to raise interest rates before the end of the year, according to a Reuters poll.

Traders are watching closely for any policy moves that would dampen demand in the world’s number one energy consumer.

“We believe a rate rise will come through sooner rather than later, and that this will ultimately trigger a correction in a number of already overheated commodity markets,” said Edward Meir, senior commodity correspondent at brokers MF Global.

China’s implied oil demand in November rose 13.7 percent from a year earlier to a record of nearly 9.3 million barrels per day, Reuters calculations based on preliminary official data showed on Monday.

(Additional reporting by Rebekah Kebede in Perth; editing by Keiron Henderson)

Oil higher after OPEC output rollover; eyes on China