Crude Climbs From Five-Week Low as Stock Gains Spur Optimism Over Demand
Crude oil climbed from a five-week low as advancing equity markets bolstered confidence that the economic recovery will be sustained, increasing fuel demand.
Oil gained for the first time in six days as the Standard & Poor’s 500 Index rose after earnings beat analysts’ estimates and Potash Corp. of Saskatchewan Inc. rejected a takeover bid. The dollar slipped 0.4 percent from yesterday, boosting the appeal of commodities as an investment.
“We’ve got higher equities and a lower dollar supporting the market,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “Rising equities are a sign the economy could be expanding, leading to increased demand. The fall of the dollar makes dollar-denominated crude cheaper for many buyers.”
Crude oil for September delivery rose 53 cents, or 0.7 percent, to settle at $75.77 a barrel on the New York Mercantile Exchange. Prices are up 14 percent from a year ago. Yesterday, futures slipped 15 cents to settle at $75.24, the lowest closing price since July 12.
Prices slipped from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles increased 5.87 million barrels to 358.6 million. September oil was up 27 cents, or 0.3 percent, at $75.51 in electronic trading at 4:33 p.m.
Brent crude oil for October settlement rose $1.30, or 1.7 percent, to end the session at $76.93 a barrel on the London- based ICE Futures Europe Exchange.
The S&P 500 climbed 1.8 percent by 2:30 p.m. New York time, when the Nymex trading floor closed. The Dow Jones Industrial Average advanced 1.7 percent. The S&P 500 settled up 1.2 percent and the Dow rose 1 percent.
Wal-Mart Stores Inc., Home Depot Inc., and Carlsberg A/S, the Nordic region’s biggest brewer, posted earnings that topped estimates and increased their full-year profit forecasts.
Dollar Slips, Output Rises
The dollar declined to $1.2878 per euro from $1.2827 yesterday as rising stock markets reduced demand for the currencies as a haven.
“The dollar is pretty weak, and I think that’s what’s guiding the market,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based procurement adviser. “Oil at $75 is seen by a lot of people as fair value. There’s not a lot of momentum in either direction.”
Oil in New York dropped 7.7 percent to $75.24 in the five days ended yesterday. Futures touched $82.97 on Aug. 4, the highest intraday price since May 4.
Oil was also supported by a report that production in the U.S. rose more than forecast in July. Output at factories, mines and utilities climbed 1 percent after a 0.1 percent decline in June, led by a rebound in auto making, figures from the Federal Reserve showed today.
Economists had forecast a 0.5 percent gain in overall production, according to the median of 74 economist estimates in a Bloomberg News survey.
Technical Support
“We’ve had a nice selloff and the market has steadied,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “Between $74.50 and $75.75 is a key technical support area. If we hold in the mid-$70s, prices should soon head back into the $80s.”
An Energy Department report tomorrow will probably show that U.S. crude oil inventories fell 1 million barrels last week, according to the median of 17 analyst responses in a Bloomberg News survey.
Gasoline supplies declined 375,000 barrels, the survey showed. Inventories of distillate fuel, a category that includes heating oil and diesel, probably climbed 1.5 million barrels.
The department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.
Fuel Prices
Gasoline for September delivery rose 2.89 cents, or 1.5 percent, to settle at $1.9532 a gallon in New York. The contract settled at $1.9243 yesterday, the lowest close since Feb. 8.
Heating oil for September settlement climbed 3.71 cents, or 1.9 percent, to end the session at $2.0259 a gallon. It was the first increase in six sessions.
Oil volume in electronic trading on the Nymex was 854,567 contracts as of 4:38 p.m. in New York. Volume totaled 472,533 contracts yesterday, 26 percent below the average of the past three months. Open interest was 1.29 million contracts.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
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