Crude Oil Rises the Most in a Month on Signs of Global Economic Recovery

Crude oil rose to the highest level in two weeks after European economic confidence increased and U.S. and German unemployment claims dropped, signals that the global economy is rebounding.

Oil climbed 2.3 percent after the European confidence report showed the euro-area recovery is strengthening even as Greece’s fiscal crisis spreads across the region. U.S. jobless claims fell to a one-month low, and German unemployment declined in April at the fastest pace in more than two years.

“Expectations in the market are mounting for improved economic growth domestically and globally,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas- based energy consultant. “The market’s moving on whatever medium-term economic data may seem to be important.”

Crude oil for June delivery rose $1.95 to settle at $85.17 a barrel on the New York Mercantile Exchange, the highest level since April 15. Futures have gained 67 percent in the past year.

An index of executive and consumer sentiment in the 16 euro nations climbed to 100.6 in April from a revised 97.9 in March, the highest level in more than two years, the European Commission in Brussels said today. That exceeded the 99.4 median estimate of 24 economists in a Bloomberg News survey.

In Germany, the region’s largest economy, unemployment decreased 68,000 to 3.29 million in April. Economists had forecast a drop of 10,000, based on the median estimate of 30 analysts surveyed by Bloomberg. U.S. initial jobless claims fell by 11,000 to 448,000 in the week ended April 24, in line with the forecast of economists in a separate Bloomberg survey.

Unemployment

“The jobless numbers were good, which gave the market a little optimism,” said Michael Fitzpatrick, vice president of energy at MF Global in New York.

European leaders moved closer to helping Greece with a bailout to stave off a default. Standard & Poor’s Ratings Services lowered its sovereign credit ratings on Greece to junk earlier this week. It also cut ratings for Portugal and Spain.

Oil gained 1 percent yesterday as the Federal Open Market Committee said economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

The U.S. Coast Guard has partly restricted traffic in and out of the Mississippi River following the massive BP Plc oil spill in the Gulf of Mexico, though the main entrance to the river is still open. The damaged well is leaking as much as 5,000 barrels of crude a day.

Ships were ordered to slow down in three of the four lanes connecting to the river to prevent disturbance of a boomed-off safety area around the oil spill, according to a bulletin issued by the Coast Guard yesterday. Traffic through the main deepwater channel, the Southwest Pass, is not restricted.

Oil Spill

The oil may reach land for the first time tomorrow in Louisiana, bringing tar balls and mousse-like hunks of emulsified oil later, Charlie Henry, the U.S. government’s lead forecaster for the spill, said yesterday.

“If shipping is disrupted, we will probably see a reaction in prices,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “We shouldn’t, but will. There’s plenty of supply available.”

U.S. inventories of crude oil rose 1.96 million barrels to 357.8 million last week, the highest level since June, the Energy Department reported yesterday. Stockpiles were forecast to climb 1 million barrels, according to a Bloomberg News survey. Imports increased 0.7 percent to 9.68 million barrels a day, the most since September.

OPEC Shipments

The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s oil, will ship 23.3 million barrels a day in the four weeks to May 15, compared with 23.36 million in the month ended April 17, according to tanker-tracker Oil Movements.

The second supply reduction will come after Asian refiners cut imports and shut plants for maintenance, the consultant said. The drop reported last week was the first since March 20. The data exclude Ecuador and Angola.

Also boosting oil prices, the Standard & Poor’s 500 Index posted its biggest gain in almost two months as better-than- estimated earnings at companies from Motorola Inc. to Baidu Inc. showed the economy is strengthening.

The S&P 500 Index rose 1.3 percent to 1,207.04 at 3:11 p.m. in New York, and the Dow Jones Industrial Average jumped 128.10 points, or 1.2 percent, to 11,173.37.

The Reuters/Jefferies CRB Index of 19 commodities advanced 0.3 percent to 275.29, the second consecutive gain. Twelve of the commodities increased, led by sugar and oil.

Brent crude for June settlement gained 74 cents, or 0.9 percent, to $86.90 a barrel on the London-based ICE Futures Europe exchange.

Oil volume in electronic trading on the Nymex was 791,112 contracts as of 2:33 p.m. in New York. Volume totaled 804,925 contracts yesterday, 18 percent above the average of the past three months. Open interest was 1.4 million contracts.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

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