Crude-Oil Futures Advance After Economic Reports Signal Growth in Demand

Crude oil jumped to the highest level in four weeks as equities surged after economic reports from China, Japan and Australia indicated that the global recovery is strengthening.

Oil climbed 5.7 percent in the past three days as Chinese exports increased the most in six years and Japan’s economy grew at the fastest rate since the second quarter of 2009 in the three months to March. The Dow Jones Industrial Average gained 2.8 percent, and the euro rose for a third day.

“We’re up along with everything else,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, consulting firm. “The stock market’s up, and the euro is strong. A 200-point gain in the Dow Jones would indicate that there’s an increase in sentiment.”

Crude oil for July delivery rose $1.10, or 1.5 percent, to settle at $75.48 a barrel on the New York Mercantile Exchange, the highest level since May 12. Futures have increased 5.8 percent in the past year.

The Dow average climbed 273.35 points to 10,172.60 in New York. The Standard & Poor’s 500 Index increased 3 percent to 1,086.84.

The euro advanced 1.3 percent against the dollar to $1.2131 from $1.1979 yesterday, boosting the appeal of commodities as an alternative investment to the U.S. currency. The euro increased on speculation that Europe’s fiscal debt crisis is unlikely to derail global growth.

China

Chinese exports gained 48.5 percent in May from a year earlier, more than the 32 percent median estimate in a Bloomberg News survey of 32 economists. None expected such a big increase.

Customs data from China, the world’s second-largest energy consumer after the U.S., showed oil imports grew last month by 4.4 percent from a year earlier to 17.84 million metric tons, or about 4.36 million barrels a day.

“Fairly good economics are coming out of China and we’re getting a boost from it,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Japan’s economy grew at an annualized 5 percent rate in the first quarter, faster than the 4.9 percent reported last month, a Cabinet Office report showed today in Tokyo. The median of 18 estimates in a Bloomberg News survey was for a 4.2 percent pace.

Australian employers added workers in May for a third straight month, with the number of people employed rising 26,900 from April, the statistics bureau in Sydney said today. That’s more than the median estimate of 20,000 in a Bloomberg survey of 23 economists.

Demand Forecast

The International Energy Agency increased its demand forecast for worldwide oil use in 2010 by 1.7 million barrels, or 2 percent, to a record 86.4 million barrels a day.

“The IEA on top of yesterday’s mildly bullish inventories report is keeping some upward pressure on the market today,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts.

U.S. oil supplies fell 1.83 million barrels to 361.4 million in the week ended June 4, the lowest level since April, the Energy Department reported yesterday.

OPEC, producer of about 40 percent of the world’s oil, will boost shipments this month as refiners raise operating rates to meet summer demand for fuels, according to a report today by tanker-tracker Oil Movements. OPEC, excluding Ecuador and Angola, will move 23.65 million barrels a day in the four weeks ending June 26, up 0.4 percent from the period to May 29.

Saudi Capacity

Saudi Arabia, the largest oil producer in the Organization of Petroleum Exporting Countries, plans to maintain spare oil- production capacity of about 2.5 million barrels a day in the next five years, Oil Minister Ali al-Naimi said in an interview with consultants Petroleum Policy Intelligence.

The kingdom’s spare capacity was about 3.2 million barrels a day in May, according to Bloomberg estimates.

The parliament of Iran, OPEC’s second-largest oil producer, will consider downgrading relations with the United Nations nuclear agency after the UN Security Council passed a fourth round of sanctions against the Persian Gulf nation yesterday over its atomic development.

“There are definitely some underlying geopolitical tensions that are giving support to energy prices,” said John Kilduff, a partner at Round Earth Capital, a New York-based hedge fund that focuses on food and energy. He cited Iran, the conflict in the Gaza Strip and the political situation in North Korea.

Brent crude for July delivery gained $1.02, or 1.4 percent, to $75.29 a barrel on the ICE Futures Europe exchange in London.

Oil volume in electronic trading on the Nymex was 692,374 contracts as of 3:02 p.m. in New York. Volume totaled 695,293 contracts yesterday, 11 percent above the average of the past three months. Open interest was 1.33 million contracts.

To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Paul Burkhardt in New York at pburkhardt@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.