Oil rebounds after biggest decline since September

Oil rebounded from a five-week low in New York on speculation that yesterday's drop, the biggest since September, was exaggerated.

West Texas Intermediate futures gained as much as 1.1 percent after nearing the 50-day moving average, signaling yesterday's sell-off was overdone, according to data compiled by Bloomberg. The euro stabilized after dropping yesterday to the lowest level against the dollar since January. China's purchasing managers' index data showed manufacturing recovered from its biggest contraction since March 2009.

“We had a huge sell-off yesterday, but today the euro is steady, and China's PMI data improved from the previous month, helping the markets,” said Robert Montefusco, senior broker at Sucden Financial in London.

Crude for January delivery rose as much as $1.02 to $95.97 a barrel in electronic trading on the New York Mercantile Exchange, compared with the 50-day moving average of about $94.25 a barrel. It was at $95.66 at 1:17 p.m. London time. Yesterday, the contract fell $5.19 to $94.95, the lowest settlement since Nov. 4. Prices have risen 4.7 percent this year after climbing 15 percent in 2010.

Brent oil for January settlement on the London-based ICE Futures Europe exchange increased 88 cents, or 0.8 percent, to $105.90 a barrel. The contract expires today. The more-actively traded February future was up $1.01 at $105.26. The European benchmark crude was at a premium of $10.24 to WTI, compared with a record $27.88 on Oct. 14.

OPEC Raises Ceiling

Crude fell 5.2 percent in New York yesterday after the Organization of Petroleum Exporting Countries decided in Vienna to increase its production ceiling to 30 million barrels a day, the first change in three years. The drop in equities and the euro because of concerns over Europe's debt crisis also pushed oil lower. The euro strengthened to $1.2994 today after weakening by 0.4 percent to $1.2983 yesterday.

“Not much was expected out of the OPEC meeting,” Olivier Jakob, managing director of research group Petromatrix GmbH in Zug, Switzerland, said in a note today. “‘The flat price drop can be seen as exaggerated given that the OPEC decision was very much expected.''

Brent crude will trade from $100 to $130 a barrel for most of 2012 and average $115, according to Gordon Kwan, head of energy research at Mirae Asset Securities Co. in Hong Kong. A ‘‘short-term spike toward $200'' can't be ruled out if economic sanctions against Iran lead to military actions around the Persian Gulf, he said today in an e-mailed report. Kwan was the most accurate forecaster of New York oil prices of 26 analysts ranked by Bloomberg in the eight quarters ended June 30.

Iran Sanctions

Saudi Arabia won't compensate for any potential decline in Iranian oil supply if the Persian country comes under sanctions affecting its exports of crude, Iranian Oil Minister Rostam Qasemi said.

Iran, the second-largest producer in OPEC after Saudi Arabia, may come under additional sanctions that target its crude trade as the European Union and other importers seek to intensify pressure on the country over its nuclear program. Qasemi met with his Saudi counterpart Ali al-Naimi in Vienna yesterday before the OPEC meeting.

‘‘Minister Naimi rejected that he wants to replace any crude if Iran faces any sanctions,” Qasemi told reporters yesterday. Al-Naimi declined to comment.

China's PMI rose to 49 in December from last month's 47.7, according to data from HSBC Holdings Plc and Markit Economics today. The line dividing contraction and expansion is 50.

U.S. Supplies

Crude inventories in the U.S., the world's largest oil consumer, declined 1.9 million barrels last week, the Energy Department said in a report yesterday. Stockpiles were lower even as imports increased and refineries reduced processing. Supplies were forecast to drop 2.5 million barrels, according to the median estimate of 12 analysts surveyed by Bloomberg News.

Distillate-fuel stockpiles, including heating oil and diesel, climbed 480,000 barrels to 141.5 million, the Energy Department report showed. That's less than half a forecast 1 million gain in the Bloomberg survey. Gasoline supplies were up 3.8 million barrels at 218.8 million.

The euro-area economy is likely to slip back into a recession, according to Ernst & Young LLP. A new plan by political leaders to end the debt crisis hasn't completely eliminated the risk of a breakup of the currency region, it said in report published in London today.

The 27 member states of the European Union accounted for 16 percent of global oil consumption last year, based on BP Plc's annual Statistical Review of World Energy.

--With assistance from Yee Kai Pin and Ramsey Al-Rikabi in Singapore and Ben Sharples in Melbourne. Editors: John Buckley, Raj Rajendran

To contact the reporter on this story: Sherry Su in London at lsu23bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sevbloomberg.net