UPDATE 1-Oil trades near 25-month high; Brent in backwardation
* Brent near 26-mth high, backwardated first time since 2008
* Technicals show U.S. crude at $91 [ID:nL3E6N302E]
* Coming Up: U.S. Non-farm payrolls Nov; 1330 GMT (Recasts headline, adds China policy, updates prices)
By Alejandro Barbajosa
SINGAPORE, Dec 3 (Reuters) - Oil was steady near 25-month highs on Friday following a slew of upbeat U.S. economic data that boded well for demand from the world's top user, ahead of a jobs report expected to show employment expanded for a second straight month in November.
U.S. crude for January fell 2 cents to $87.98 a barrel at 0706 GMT, still headed for a second straight weekly gain, after ending at $88 on Thursday, the highest settlement since October 2008. Prices touched $88.63 on Nov. 11, the highest intraday price in 25 months.
Jobs, home sales and retail sales data from the U.S. on Thursday pointed to a sustained economic recovery, while statistics earlier this week showed factory activity in China, the world's second-largest oil user, reached a seven-month high. China will switch to a prudent monetary policy from a moderately loose stance, the Communist Party's top leaders decided on Friday, a change that could pave the way for more interest rate increases and lending controls, the state Xinhua news agency reported. [ID:nTOE6B2048]
While talk of higher rates in China has kept a lid on oil price gains, analysts do not expect to see much of a dent in the country's appetite for crude.
"While financial risks remain, we feel that the increasing synchronicity of global economic growth provides a resurgent force to physical commodity demand," JP Morgan analysts headed by Lawrence Eagles said.
The European Central Bank resisted pressure on Thursday to commit to a major bond-buying program to contain the euro zone debt crisis, but traders said the ECB had been quietly buying bonds anyway, boosting the euro and raising the appeal of riskier assets, including commodities. [ID:nLDE6B10I4]
"Oil, like most global markets, has been buffeted by concerns surrounding the euro zone problems and their potential broader implications," JP Morgan said.
Rising oil demand from emerging and developed economies is also changing the price structure of crude futures markets. ICE Brent contracts for earliest delivery or settlement are now trading at a premium to later contracts for the first time since May 2008, according to Barclays Capital.
ICE Brent for January LCOc1 was unchanged at $90.69 by 0630 GMT, after touching $90.84 on Thursday, the highest price in 26 months. The February contract was down 2 cents at $90.63.
This pricing structure, known as backwardation, is replacing the prevalent so-called contango of the past two years, where earlier contracts traded at a discount to future ones. Contangos are reflective of oversupplied markets, while the turn to backwardation signals a tightening balance. [ID:nL3E6N30BB]
"The combination of the effect of falling prompt inventory at the front of the curve and a healthy degree of producers selling along the curve has helped to pivot the (Brent) curve back towards flat," Barclays Capital analysts headed by Paul Horsnell said in a weekly report.
U.S. nonfarm payrolls likely increased last month by 140,000, according to a Reuters poll, amid strong gains in private hiring reported on Wednesday. The report is due at 1330 GMT. [ID:nN30116474]
Fresh signs the U.S. economy has broken out of its summer soft patch emerged on Thursday as data showed a gauge of jobless benefits hit a new two-year low last week and pending home sales unexpectedly rose in October. [ID:nN02209260]
The picture also brightened as retailers recorded their best sales gains in four years in November, with shoppers drawn in by deals throughout a month that culminated with a surge in "Black Friday" traffic.
Both U.S. heating oil and gasoline futures rallied on Thursday, supporting crude's rise. Heating oil rose amid colder temperatures in the U.S. Northeast, the biggest heating oil market. Gasoline gained on regional supply tightness in the key East Coast market.
Household, government spending and exports drove euro zone economic growth in the July- September period, official data showed on Thursday. [ID:nLDE6B118S] In other markets, the Nikkei ended flat holding on to its Thursday's gains of almost 2 percent, after hitting a six-month intraday high of 10,254.00. (Editing by Himani Sarkar)
- Tweet this
- Share this
- Digg this
India approved on Saturday the purchase of 814 mounted gun systems for the army at a cost of 157.5 billion rupees ($2.55 billion), a defence ministry spokesman said. Full Article