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Crude surges despite bearish economic news

CommoditiesNov 14, 2012 01:49PM ET
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Investing.com - Crude oil futures traded higher during U.S. after hours Wednesday despite official data indicating retail sales in the U.S. fell more-than-expected in October.

Traders remained fixated on concerns over the euro zone’s ongoing debt crisis and the fiscal outlook in the U.S. 

On the New York Mercantile Exchange, light sweet crude futures for delivery in January traded at USD86.78 a barrel during U.S. afternoon trade, surging 1.08%.

New York-traded oil prices fell to the lowest level of the session after the U.S. Commerce Department said that retail sales fell by a seasonally adjusted 0.3% in October, disappointing expectations for a 0.2% decline.

Prices claimed despite core retail sales, which exclude automobile sales, were flat last month. Analysts had expected core retail sales to increase 0.2% in October, after rising by an upwardly revised 1.2% in September.

Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy.

A separate report showed that producer price inflation in the U.S. fell unexpectedly in October, while core prices also dipped.

In a report, the Labor Department said that producer prices fell by a seasonally adjusted 0.2% in October, compared to expectations for a 0.2% increase, after rising 1.1% in September.

The core producer price index declined 0.2% in October, defying expectations for a 0.1% increase, after holding flat in September. 

Meanwhile, concerns over Greece’s fiscal woes remained after a meeting of euro zone finance ministers earlier in the week ended without any final decision on whether to release an urgently needed EUR31.5 billion bailout installment for the debt-strapped country. 

The decision instead has been postponed until November 20th, as the International Monetary Fund and European officials were unable to reach an agreement on how best to reduce Greece’s debt to manageable levels.

Investors also remained concerned over the looming “fiscal cliff” in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1. 

There are fears the U.S. economy will fall back into a recession, unless a divided Congress and the White House can work out a compromise before then.

Oil traders were now looking ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer. 

The American Petroleum Institute will release its inventories report later in the day, while Thursday’s government report could show crude stockpiles rose by 1.9 million barrels to the highest level since July. 

The report is being released a day later than usual due to the Veteran’s Day Holiday in the U.S. on November 12.

The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand. 

Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery eased down 0.15% to trade at USD107.18 a barrel, with the spread between the Brent and crude contracts standing at USD21.65 a barrel.

Crude surges despite bearish economic news

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