Oil approaches 12-wk highs

SINGAPORE: Oil rose towards 12-week highs above $79 on Monday, driven by investor appetite for commodities and energy risk, with macroeconomic indicators in top consumers the United States and China showing slower but sustained growth. U.S. September crude CLc1 rose 24 cents to $79.19 a barrel by 0200 GMT, having reached a 12-week high of $79.69 last week and climbed 4.35 percent last month. ICE Brent LCOc1 gained 19 cents to $78.37. Money managers increased bets that prices would rise, the so-called net long crude oil positions, to the highest level since May on the New York Mercantile Exchange in the week to July 27, the Commodity Futures Trading Commission said on Friday, when wheat surged to cap its biggest monthly gain since 1959. "Long positions are starting to creep back into the market," said Ben Westmore, a commodities analyst at National Australia Bank in Melbourne, adding, "It's a gradual process of regaining confidence that there is not going to be a default soon," in a reference to the euro zone's debt crisis. "The market is aware of the fact that it's going to be a pretty slow recovery in the U.S. and the euro zone, so although oil demand will grow over the next 12 months or so, it's going to be a slow, gradual process," Westmore said. U.S. gross domestic product expanded at a 2.4 percent annual rate, missing expectations for growth of 2.5 percent, after an upwardly revised 3.7 percent growth pace in the first quarter. "People are looking more closely at the U.S. GDP number and although the core of the market was disappointed, it was not too far from expectations and there was a revision upwards to the first quarter," said Westmore. "It was slightly more positive." China's official purchasing managers' index (PMI) fell to a 17-month low in July of 51.2 from 52.1 in June, the China Federation of Logistics and Purchasing (CFLP) said on Sunday. The PMI is designed to provide a timely snapshot of business conditions and a figure above 50 indicates expansion. But Japan's Nikkei average climbed 1.3 percent on Monday as investors snapped up shares of firms with robust corporate earnings, helping the market shrug off the lacklustre U.S. and Chinese economic data. A tropical cyclone forming in the mid-Atlantic also lent support to oil prices as the hurricane season enters what in recent years has been a period of peak activity between August and early October. The U.S. National Hurricane Center (NHC) said late on Sunday that a tropical depression may be forming in the mid-Atlantic, assigning an 80 percent likelihood that the system may become a tropical cyclone within the next 48 hours. Attention this week will remain on U.S. economic data, with the Institute for Supply Management manufacturing index expected later on Monday, followed by July payrolls on Friday. U.S. crude inventories posted their biggest weekly increase since 2008 in the week to July 23 as imports surged, while gasoline stockpiles climbed for a fifth consecutive week and supplies of distillates including diesel for a ninth. "The oil balance is not going to tighten too much," Westmore said.