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Crude Advances to 27-Month High on Bets Economic Recovery May Boost Demand

By Mark Shenk - Jan. 3 (Bloomberg) – Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant, talks about the prospects for the oil market in 2011. He speaks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Crude oil rose to a 27-month high on speculation the U.S. will sustain an economic recovery this year, bolstering fuel demand in the world’s biggest oil- consuming country.
 “Oil looks like one of the best investments of 2011,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Investors want to get in fast and get in early. Any way you look at it oil is going to be in demand this year.”  
Crude oil for February delivery increased 17 cents to $91.55 a barrel on the New York Mercantile Exchange, the highest settlement price since Oct. 3, 2008. Futures climbed 15 percent in 2010. U.S. construction spending rose in November for a third month, helped by federal government projects. The 0.4 percent gain followed a 0.7 percent increase in October, the Commerce Department said today.
Optimism
“Optimism is the key word for the new year,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Oil is going to follow whatever the S&P 500 is doing.”
Blackstone Group LP’s Byron Wien, who called the bottom for U.S. stocks in 2010 while failing to predict the size of the ensuing rally, said economic growth will approach 5 percent this year. He reiterated a forecast that oil will climb to $115 a barrel. Wien, chairman of Blackstone’s advisory services unit, made his projections in his annual “Ten Surprises” list published since 1986.
Oil prices will average $93 a barrel this year and are “very likely” to climb above $100, Jason Schenker, president of Prestige Economics in Austin, Texas, said in an interview with Deirdre Bolton on Bloomberg Television’s “InsideTrack.”
OPEC Quota
U.S. oil stockpiles decreased for four weeks in December, the longest drop in a year, according to the Energy Department. Total products supplied, a measure of demand, gained 3.1 percent in the seven days ended Dec. 24 to 20.7 million barrels a day, according to the department. Oil prices are likely to rise to $100 a barrel in 2011, analyst Stephen Schork forecast on Bloomberg Television today.
Implied Volatility
“Unfortunately, given where implied volatility is trading in the options market, the odds are pretty good that we’re going to see $100 oil at some point this year,” Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said in an interview on “Surveillance Midday” with Tom Keene.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net