Oil Futures Gain Despite US Demand Concerns

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Despite a late decline, oil futures ended the week with gains.

Crude oil prices were on the rise at the start of the week, driven by concerns over the ongoing strike in France that had caused massive fuel supply disruptions as well as expectations of further quantitative easing (QE) from the United States’ Federal Reserve.

An update on US industrial production released last week showed a decline of 0. per cent in September, which was interpreted as another sign that more QE is inevitable.

However, traders were mindful of Fed Chairman, Ben Bernanke’s recent comments that suggested that while the Fed was inclined to resort to more stimulus to drive up inflation and spur the slowing recovery, it appeared to be undecided on what the timing and the scale of the next round of QE should be.

The US government’s lack of a resolution to introduce more QE has provided a relief for the US dollar that hit multi-month lows against a basket of other major currencies last week.

The surge in greenback has pushed down oil prices, making the dollar denominated crude more expensive for holders of other currencies, denting demand.

Oil was hit hard by China’s unexpected decision to hike interest rates by 0.25 per cent, which was announced on Wednesday, marking the government’s latest attempt to curb inflation that is firmly on track to eclipse the 3 per cent target for the full year.

Higher interest rates are expected to curb economic activity, pushing down the demand for crude oil from the world’s second largest energy consumer.

On top of that, the prices have been pressured by last week’s US inventories reports, which signalled a lower level of demand from the world’s largest energy consumer.

The US Energy Department said that gasoline stockpiles unexpectedly gained 1.3 million barrels last week, while crude oil inventories in the added 700,000 barrels.

Volumes were very low on Friday as investors opted to stay on the sidelines amid caution over the G20 meeting that kicked off in South Korea.

The group focused on fiscal policy issues, looking to work out an agreement to preclude a currency war that could cause countries to resort to protectionist measures.

 

CNOOC, GNPC Stake $5bn For Kosmos’  Assets

OIL & GAS; 9

 

China’s National Oil Corporation (CNOOC) and Ghana National Petroleum Corp. (GNPC) have submitted a $5 billion bid for Kosmos Energy LLC’s assets in the West African country.

Sources with direct knowledge of the matter said on Friday that buyers have been circling Kosmos, attracted to the company’s stake in a large oil discovery known as the Jubilee field.

Kosmos is backed by private equity firms Blackstone Group and Warburg Pincus.

The Tide gathered that Exxon Mobile had previously offered $4 billion for the stake.