Crude oil rose for a second day on expectations that economic growth in the US, the world's largest energy consumer, and in the emerging markets of Asia will boost fuel demand.
Oil extended its 1.9 per cent gain on February 26 after the US reported its economy expanded at 5.9 per cent in the fourth quarter, the most in six years. Saudi Arabia, the world's biggest crude exporter, agreed yesterday to almost double shipments to India as Asia's third-largest economy plans three new refinery projects.
''The market is always very sensitive to what's happening in the US since it's the world's biggest user,'' said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group. ''There is a general feeling that we will see global demand picking up this year.''
Crude oil for April delivery rose as much as 95 cents, or 1.2 per cent, to $US80.61 a barrel, in electronic trading on the New York Mercantile Exchange. It was at $US80.10 at 10:29 a.m. Singapore time. The contract climbed $US1.49 to settle at $US79.66 a barrel on February 26.
Oil climbed after the US gross domestic product report showed investment in equipment and software increased at the fastest pace in a decade, renewing optimism that the recession has ended. Federal Reserve Chairman Ben S. Bernanke said last week that the US economy is in a ''nascent'' recovery.
Oil prices are also gaining as Asian equities climbed for a second day led by material-related companies. The MSCI Asia- Pacific Index rose 0.3 per cent to 118.47 as of 9:40 a.m. in Tokyo. Japan's Nikkei 225 Stock Average gained 0.2 per cent.
''The oil markets are very highly correlated to the equity markets now,'' said ANZ's Pervan. ''It's taking guidance from the expectation that demand will pick up.''
India crude
Saudi Arabia agreed to increase crude supplies to India to India to 40 million metric tons a year, or about 770,000 barrels a day, from 25.5 million tons a year, during a meeting yesterday between Oil Minister Ali al-Naimi and his counterpart Murli Deora, India's Oil Ministry said on its Web site. The two sides will also study ''enhancement'' of joint projects.
India is seeking to increase supply for three refinery projects at Paradip, Bhatinda and Bina, the ministry said. It also plans to import more heavy crude oil from state producer Saudi Aramco, according to the statement.
The three new plants - Indian Oil Corp.'s Paradip refinery in eastern Orissa state, Hindustan Petroleum Corp.'s unit at Bhatinda in northern Punjab and Bharat Petroleum Corp.'s Bina plant in central Madhya Pradesh - will increase India's refining capacity of 178 million tons a year by almost 20 per cent by the end of 2012.
Net-longs gain
Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended February 23, according to US Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 85,352 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 16,916 contracts, or 25 per cent, from a week earlier.
Brent crude for April settlement rose as much as 86 cents, or 1.1 per cent, to $US78.45 a barrel, on the London-based ICE Futures Europe exchange. It was at $US77.99 a barrel at 10:26 a.m. Singapore time. The contract climbed $US1.30, or 1.7 per cent, to end the February 26 session at $US77.59 a barrel.
Abu Dhabi National Oil Co., the United Arab Emirates' state-run producer, deepened cuts for shipments of crude in April because of OPEC limits on members' output.
UAE cuts
Shipments of Murban, the largest export grade, and Umm Shaif will be 15 per cent less than contracted amounts for April, Adnoc said in a statement today. That's a deeper cut than the 10 per cent reduction in March loadings for those crudes.
The Organization of Petroleum Exporting Countries increased crude-oil production by 125,000 barrels a day, or 0.4 per cent, to an average 29.17 million barrels a day in February, the highest level since December 2008, a Bloomberg News survey showed. Saudi Arabia led the gain, with output rising 100,000 barrels a day to 8.25 million.
The group is scheduled to gather on March 17 in Vienna.
''Obviously they aren't as concerned about compliance when they've got the price where they want it,'' said ANZ's Pervan. ''I wouldn't expect any change in the targets when they meet but I'm sure the bigger producers will bang the table and say to tighten up compliance.''
