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Crude Oil Rises From Four-Week Low on Speculation U.S. Supplies Declined
Crude oil rose for the first time in seven days following a forecast that U.S. retail sales are growing at the fastest pace in four years, a signal that the economy is rebounding from the worst recession since the 1930s.
Oil jumped from a four-week low as sales expanded at an average monthly rate of 4 percent for the five months ended in June, according to the International Council of Shopping Centers’ estimate before its June report tomorrow. U.S. oil supplies likely fell last week, a survey showed.
“The market is probably trying to grab onto any positive numbers that it’s seeing,” said Matt Smith, a commodities analyst for Summit Energy Inc. in Louisville, Kentucky. “Things have been particularly glum recently.”
Crude oil for August delivery gained $2.09, or 2.9 percent, to settle at $74.07 a barrel on the New York Mercantile Exchange. The contract fell to its lowest level since June 7 yesterday. Prices have dropped 6.7 percent this year.
Prices rose from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles decreased 7.26 million barrels to 351.8 million. August oil increased $2.77, or 3.9 percent, to $74.75 a barrel in electronic trading at 4:34 p.m.
U.S. oil stockpiles decreased by 2 million barrels in the seven days ended July 2 from 363.1 million the week before, according to the median estimate of 15 analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Twelve of the respondents in the survey forecast a decrease and three estimated a gain.
Last week, Hurricane Alex crossed the Gulf of Mexico, curbing domestic production and imports.
Gasoline Demand
“The five-year average withdrawal is 4 million barrels but it reflects a time of greater gasoline demand,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based procurement adviser. “If we don’t see a pickup in gasoline demand after the Fourth of July holiday, then this market is set up for another run down.”
U.S. gasoline consumption increased 0.2 percent from the year earlier in the week ended July 2, the first gain in five weeks, MasterCard Inc. said today in its SpendingPulse report. The July Fourth holiday is traditionally a peak demand period for U.S. motorists.
Demand through July 2 jumped to the highest level in five weeks, the second-biggest payments network company reported.
Gasoline for August delivery climbed 5.4 cents, or 2.7 percent, to settle at $2.0253 a gallon on the Nymex.
Price Forecast
The Energy Department cut its oil price forecast for 2010 to an average $78.69 a barrel in its monthly Short-Term Energy Outlook today from $78.75 a barrel a month ago. The department also raised its outlook for global oil consumption this year to 85.82 million barrels a day from 85.51 million in June.
Brent crude for August delivery gained $2.06, or 2.9 percent, to settle at $73.51 a barrel on London’s ICE Futures Europe exchange.
U.S. equities increased for a second day. The Standard & Poor’s 500 Index gained 3.1 percent to 1,060.27. The Dow Jones Industrial Average jumped 274.66 points, or 2.8 percent, to 10,018.28. The Dow average dropped more than 600 points in seven sessions through July 2.
“After the long drop in both the stock market and crude, we’re seeing a little bit of a rebound effect,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The economic news isn’t that bad and we haven’t seen that much out in the last couple of days.”
Mortgage Applications
An index of mortgage applications in the U.S. rose last week to the highest level since October as more Americans took advantage of lower interest rates and refinanced their homes, according to the Mortgage Bankers Association. The index gained 6.7 percent in the week ended July 2.
U.S. service industries expanded in June at a slower pace than forecast, the Institute for Supply Management’s index of non-manufacturing businesses showed yesterday. Last week, government reports showed that employment slipped in June for the first time this year and factory orders declined more than forecast.
Oil has traded within about a $10 price range for the past month, between $69.51 and $79.38 a barrel.
“Buyers and sellers are fairly comfortable right now,” said Michael Fitzpatrick, vice president of energy at MF Global in New York. “It looks like the market is trying to get some momentum here on the upside. The longer you go without breaking $69.50, the stronger the market’s going to look, and you’re going to add to the momentum.”
Tropical Cyclone
There’s 50 percent chance that a group of thunderstorms moving west-northwest over the western Gulf of Mexico will turn into a tropical cyclone before reaching the coast of northeastern Mexico or southern Texas tomorrow, the U.S. National Hurricane Center said in an advisory at 2 p.m. Miami time.
Oil volume in electronic trading on the Nymex was 445,987 contracts as of 4:26 p.m. in New York. Volume totaled 536,320 contracts yesterday, 31 percent below the average of the past three months. Open interest was 1.27 million contracts.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
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