Oil rises above $94 on China, US recovery hopes

BANGKOK (AP) — Oil prices rose above $94 on Monday, supported by signs of economic recovery in the U.S. and China.
Benchmark oil for February delivery was up 56 cents to $94.12 per barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract dropped 26 cents to finish at $93.56 a barrel in New York on Friday.
Gordon Kwan, head of energy research at Mirae Asset Securities Ltd. in Hong Kong, said oil prices were rising on signs that the fragile economic recoveries in the world's two biggest economies appeared to be gaining traction. The U.S. housing market has shown steady improvement, while China's trade growth rebounded strongly in December.
"China and the U.S. appear to be on a very solid track of economic recovery. This supports oil prices at much higher levels." He said that prices were also moving up because of increased energy consumption in China, which is enduring its coldest winter in nearly three decades.
"There is the possibility that West Texas Intermediate could reach $95 per barrel in the coming days and Brent could go to $115," Kwan said.
Brent crude, used to price international varieties of oil, was up 39 cents to $110.23 per barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline rose 0.3 cent to $2.758 a gallon.
— Heating oil rose 1.1 cents to $3.02 a gallon.
— Natural gas rose 3.3 cents to $3.36 per 1,000 cubic feet.

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U.S. economy to grow 2.5 percent this year: Fed's Evans

HONG KONG (Reuters) - The U.S. economy is expected to grow by 2.5 percent in 2013, improving to 3.5 percent growth in 2014, top Fed official Charles Evans said on Monday.
Evans also forecast the U.S. unemployment rate would be 7.4 percent this year, easing to about 7 percent in 2014.
"One good indicator of labor market improvement would be if we saw payroll employment increase by 200,000 each month for a number of months. We've been averaging about 150,000, but it's been very uneven ... we need a higher pace of employment growth and less volatility in that pace," Chicago Fed President Evans said.
The creation of 1 million jobs over six months would be a "substantive" improvement, but bringing unemployment down to the key level of 6.5 percent was likely to take much longer, probably until mid-2015, he said, speaking at the Asian Financial Forum in Hong Kong.
The U.S. Federal Reserve's decision last year to tie monetary policy to specific economic conditions should help boost the recovery without letting inflation take hold, said Evans, a chief architect of the policy.
It also provides additional accommodation by assuring markets that rates will remain low even after the economy perks up, he said.
"Given more explicit conditionality, markets can be more confident that we will provide the monetary accommodation necessary to close the large resource gaps that currently exist," he said. "Additionally, the public can be more certain that we will not wait too long to tighten if inflation were to become a substantial concern."
Last month, the Fed ramped up asset purchases aimed at spurring growth, and pledged to keep rates near zero until the unemployment rate drops to 6.5 percent, as long as inflation expectations do not climb above 2.5 percent.
Evans, who rotates into a voting spot on the Fed's policy-setting panel this year, had been pushing for exactly such a threshold-based policy for more than a year, saying the Fed needed to take a much more activist role in trying to meet its mandate to boost employment.
His speech on Monday was his first since mid-2011 to omit an explicit call for further Fed easing, suggesting he is now comfortable that the current stance of monetary policy will help bring down unemployment, still high at 7.8 percent.
Kansas City Fed President Esther George and other critics of the Fed's bond-buying program and low-rate policy have warned the central bank's actions could overheat the economy, leading to unwanted inflation.
Evans, one of several policy "doves" set to speak early this week, sought to head off such criticism.
While the Fed's new 2.5-percent inflation threshold "allows for inflation at times to run modestly above" the Fed's 2-percent goal, it in fact acts as a safeguard against overheating, he said.
The U.S. economy grew at a 3.1 percent annual rate in the third quarter, but growth is expected to have slowed in the final months of the year. Last month, Fed policymakers said they expected GDP growth of between 2.3 to 3.0 percent this year, and 3.0 to 3.5 percent in 2014.
Meanwhile, most expect inflation to run a bit below the Fed's 2-percent target.
U.S. lawmakers on January 1 struck a partial deal that avoids the worst of planned tax rises known as the "fiscal cliff," but put off big decisions on spending cuts for two more months.
Evans said the effects of fiscal policy on U.S. growth are so far about what he had expected when making his growth forecasts late last year.
But he cautioned lawmakers on taking overly aggressive steps to cut back spending.
"The United States must consolidate its public sector finances; but it must do so gradually if we are to avoid further economic turmoil or another downturn," Evans said.

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U.S. economy to grow 2.5 percent this year: Fed's Evans

HONG KONG (Reuters) - The U.S. economy is expected to grow by 2.5 percent in 2013, improving to 3.5 percent growth in 2014, top Fed official Charles Evans said on Monday.
Evans also forecast the U.S. unemployment rate would be 7.4 percent this year, easing to about 7 percent in 2014.
"One good indicator of labor market improvement would be if we saw payroll employment increase by 200,000 each month for a number of months. We've been averaging about 150,000, but it's been very uneven ... we need a higher pace of employment growth and less volatility in that pace," Chicago Fed President Evans said.
The creation of 1 million jobs over six months would be a "substantive" improvement, but bringing unemployment down to the key level of 6.5 percent was likely to take much longer, probably until mid-2015, he said, speaking at the Asian Financial Forum in Hong Kong.
The U.S. Federal Reserve's decision last year to tie monetary policy to specific economic conditions should help boost the recovery without letting inflation take hold, said Evans, a chief architect of the policy.
It also provides additional accommodation by assuring markets that rates will remain low even after the economy perks up, he said.
"Given more explicit conditionality, markets can be more confident that we will provide the monetary accommodation necessary to close the large resource gaps that currently exist," he said. "Additionally, the public can be more certain that we will not wait too long to tighten if inflation were to become a substantial concern."
Last month, the Fed ramped up asset purchases aimed at spurring growth, and pledged to keep rates near zero until the unemployment rate drops to 6.5 percent, as long as inflation expectations do not climb above 2.5 percent.
Evans, who rotates into a voting spot on the Fed's policy-setting panel this year, had been pushing for exactly such a threshold-based policy for more than a year, saying the Fed needed to take a much more activist role in trying to meet its mandate to boost employment.
His speech on Monday was his first since mid-2011 to omit an explicit call for further Fed easing, suggesting he is now comfortable that the current stance of monetary policy will help bring down unemployment, still high at 7.8 percent.
Kansas City Fed President Esther George and other critics of the Fed's bond-buying program and low-rate policy have warned the central bank's actions could overheat the economy, leading to unwanted inflation.
Evans, one of several policy "doves" set to speak early this week, sought to head off such criticism.
While the Fed's new 2.5-percent inflation threshold "allows for inflation at times to run modestly above" the Fed's 2-percent goal, it in fact acts as a safeguard against overheating, he said.
The U.S. economy grew at a 3.1 percent annual rate in the third quarter, but growth is expected to have slowed in the final months of the year. Last month, Fed policymakers said they expected GDP growth of between 2.3 to 3.0 percent this year, and 3.0 to 3.5 percent in 2014.
Meanwhile, most expect inflation to run a bit below the Fed's 2-percent target.
U.S. lawmakers on January 1 struck a partial deal that avoids the worst of planned tax rises known as the "fiscal cliff," but put off big decisions on spending cuts for two more months.
Evans said the effects of fiscal policy on U.S. growth are so far about what he had expected when making his growth forecasts late last year.
But he cautioned lawmakers on taking overly aggressive steps to cut back spending.
"The United States must consolidate its public sector finances; but it must do so gradually if we are to avoid further economic turmoil or another downturn," Evans said.

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S.Africa's rand mostly flat as farming strike looms

JOHANNESBURG (Reuters) - South Africa's rand held mostly steady on Monday as a strike that hit the farm belt last week looked set to intensify, posing a risk to agricultural production in Africa's largest economy.
The rand was positioned to trade within a narrow range against the dollar this week after being pushed down in the previous session following a sovereign ratings downgrade by Fitch, which warned of growing social instability and labour unrest.
Dealers expect short covering could benefit the rand at the start of the week, but that manufacturing data on Wednesday may give it a knock.
Unions have warned that farm workers' protests last week in the western grape-growing region were expected grow as workers seek to have their daily wages doubled to 150 rand from about 70 rand presently. Two people died in similar farm protests last year.
At 0634 GMT, the rand was at 8.7200, not too far from its 8.7255 New York close on Friday. It traded at a high of 8.7185 earlier.
"While the downgrade may be fully priced by now, the fact that the strike activity persists and the probability that this week's mining and manufacturing data could disappoint suggest that rand bulls should not become too enthusiastic about the chances of a swift recovery," Absa Capital said in a note.
Several major mining firms have yet to recover from crippling strikes that left more than 50 people dead last year and slowed production in the crucial sector.
The sovereign ratings downgrade may squeeze foreign exchange supply but some traders expect low returns in developed markets to underpin demand for South Africa's higher yielding paper.
The yield for the 13-year benchmark lost 3.5 basis points to 7.130 percent while the yield on the 2015 note was down 2.5 basis point to 5.325 percent.

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