Oil Rises to Two-Week High

Financeroll – Crude oil climbed to the highest level in two weeks as the leaders of Germany and France pledged to stem the European sovereign-debt crisis.

Futures rose as much as 3.8 percent after German Chancellor Angela Merkel and French President Nicholas Sarkozy said yesterday they will deliver a plan to recapitalize the region’s banks and address the Greek crisis by Nov. 3. The euro surged against the dollar after the announcement. U.S. employers added more workers in September than forecast, a report showed Oct. 7.

“Optimism is coming back into the market,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “As concerns about the European debt crisis and the U.S. economy heading into recession ease, oil prices are going to climb. These headlines are a sign that demand will increase.”

Crude oil for November delivery rose $2.61, or 3.2 percent, to $85.59 a barrel at 11:07 a.m. on the New York Mercantile Exchange. The contract touched $86.09, the highest level since Sept. 21. Oil is down 6.3 percent this year.

Brent oil for November settlement increased $2.62, or 2.5 percent, to $108.50 a barrel on the London-based ICE Futures Europe exchange.

The euro advanced after Merkel said yesterday in Berlin that European leaders will do “everything necessary” to ensure that banks have adequate capital.

Euro Advances

The euro gained 2.2 percent to $1.3669 at 11:09 a.m. in New York. A stronger European currency increases the appeal of raw materials as an alternative investment. The shared currency weakened on Oct. 7 after Fitch Ratings lowered Spain’s foreign and local debt to AA- from AA+ and cut Italy’s to A+ from AA-, citing an “intensification” of the region’s crisis.

Crude is rising on “high hopes for an imminent Eurozone bailout,” Andrey Kryuchenkov, a London-based analyst at VTB Capital, said in an e-mail. “Policymakers in the EU have few options and no one wants 2008 all over again.”

Oil capped the biggest weekly gain in seven months last week as larger-than-forecast U.S. jobs growth eased concern that the economy is slowing.

“Eight-five dollars is probably fair value for crude, with a $5 to $10 range around it,” said Kyle Cooper, director of research for IAF Advisors in Houston.

U.S. stocks surged. The Standard & Poor’s 500 Index rose 2.7 percent to 1,186.94, and the Dow Jones Industrial Average increased 2.3 percent to 11,358.59.

The Organization of Petroleum Exporting Countries is likely to keep oil output targets unchanged when it meets in December, Mohammad Ali Khatibi, an Iranian representative to the group, said yesterday. Producers and consumers are satisfied with the current price level for crude, Ali Khatabi said, according to Shana, the Iranian Oil Ministry’s news website.

There’s no excess supply in world oil markets and Saudi Arabia has been adjusting output to match fluctuating demand over recent months, Oil Minister Ali Al-Naimi said Oct. 8. The kingdom is OPEC’s biggest producer.[Blb]