china's growth expected to boost oil

Oil Rises to Record as China's Growth Expected to Boost Demand ListenListen

Oct. 22 (Bloomberg) -- Crude oil futures rose to a record $55.39 a barrel in New York after a report that the Chinese economy grew more than expected. Oil's rally lifted heating oil to a record and natural gas to a 20-month high.

Chinese oil demand is expected to jump 15 percent to 6.3 million barrels a day this year, according to the International Energy Agency. China's 9.1 percent expansion in the third quarter was faster than the 8.9 percent projected in a Bloomberg survey. Prices have also risen on concern that U.S. stockpiles of heating oil are insufficient to meet winter demand.

``China's growth rate is still strong and the numbers point to a continuing uptrend in demand,'' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. ``We are going into the winter heating season with inventories at the lower end of where we would like them to be.''

Crude oil for December delivery rose 78 cents, or 1.4 percent, to $55.25 a barrel at 11:31 a.m. on the New York Mercantile Exchange. Prices reached $55.39, the highest since futures began trading in 1983. Oil futures were 85 percent higher than a year earlier and the December contract has jumped 2.4 percent this week.

In London, the December Brent crude-oil futures contract rose 62 cents, or 1.2 percent, to $51.34 a barrel on the International Petroleum Exchange. Brent futures reached $51.50 on Oct. 12, the highest since the contract began trading in 1988. Prices were up 3 percent this week.

``What strikes me is that we are maintaining these highs without any new supply threats,'' said Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York.

Heating Oil

Heating-oil inventories fell 1 percent to 49.5 million barrels in the week ended Oct. 15, leaving supplies 11 percent lower than last year, the Energy Department said Oct. 20. The U.S. is now using 88.2 percent of its refining capacity, down from 92.1 percent a year ago.

Heating oil for November delivery rose 1.85 cents, or 1.2 percent to $1.598 a gallon in New York. Prices reached $1.602, the highest since the fuel began trading in 1978. Gasoline for November delivery rose 2.38 cents, or 1.7 percent, to $1.436 a gallon. Prices reached $1.443, the highest since May 28.

Natural gas rose because of the increasing price for oil- based fuels. From 5 to 10 percent of U.S. factories can burn either natural gas or oil-based fuels, depending on which is more economical. Natural gas for November delivery rose 28.3 cents, or 3.7 percent, to $7.98 per million British thermal units in New York.

Retail Prices

The average U.S. retail heating-oil price rose to a record $1.988 a gallon for the week ended Oct. 18, the Energy Department said. Prices advanced 8 cents from the previous week and were 60.5 cents, or 44 percent, more than a year earlier. It is the highest price since the government began conducting the weekly survey of fuel retailers in October 1990.

The average U.S. retail price for regular-grade gasoline rose 4.2 cents the past week to $2.035 a gallon. Diesel reached a record $2.18 a gallon, according to a department report on Oct. 18.

The New York Mercantile Exchange, the world's largest energy futures market, said it will increase some of the margin requirements on light sweet crude oil, heating oil, natural gas and swap futures contracts at the close of business today.

Margins represent cash that traders must deposit to safeguard transactions. The exchange adjusts margins when it believes its members and customers need to put down more or less capital to cover their trades.

``The theory is that raising margins will drive the speculators out of the market,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. ``The market reaction shows that this is the real deal and not the action of speculators that's brought prices to this level.''