Oil rose for the first time in four days in New York as an advance in U.S. equities signaled the economic recovery may accelerate.
Crude gained 0.8 percent, erasing an earlier drop, as the Standard & Poor’s 500 Index increased amid advances in consumer stocks and St. Louis Federal Reserve President James Bullard said the Fed may be able to cut about $100 billion from its plan to buy Treasury securities as the economy rebounds.
“We’re seeing equities move higher, and that’s giving a little bit of positive sentiment toward crude,” said Matt Smith, a commodities analyst for Summit Energy Services Inc. in Louisville, Kentucky. “The remarks by Mr. Bullard indicate the potential for the economy is looking a little better.”
Crude for May delivery gained 81 cents to settle at $104.79 a barrel on the New York Mercantile Exchange. Oil has risen 28 percent in the past year.
Prices pared gains after the settlement when the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles increased 5.69 million barrels last week to 356.4 million. May oil rose 54 cents, or 0.5 percent, to $104.52 a barrel in electronic trading at 4:31 p.m.
Brent crude for May settlement on the London-based ICE Futures Europe exchange rose 36 cents, or 0.3 percent, to $115.16 a barrel.
If uncertainties in the global economy are resolved, the Fed could “pull up a little bit shy of our total of $600 billion,” in planned purchases of Treasury securities, a measure known as quantitative easing, Bullard told reporters today in Prague, where he was attending a financial conference.
Oil also advanced after Simmons & Co. International and Baker Hughes Inc. (BHI) said Saudi Arabian Oil Co., known as Aramco, was planning to boost its drilling rigs by as much as 30 percent to maintain its spare capacity after making more oil available to compensate for shortfalls in Libyan production.
“Some people are seeing that as a bullish thing that they’re starting to worry about their spare capacity,” said Tom Bentz, a broker with BNP Paribas Commodity Futures in New York.
The kingdom, the largest producer in the Organization of Petroleum Exporting Countries, pumped 8.43 million barrels a day in February out of total capacity of 11.5 million, based on Bloomberg News estimates.
Saudi Arabia will increase its drilling rigs to 118 by the end of this year from 92, Chad Deaton, chief executive officer of Houston-based Baker Hughes, said in a speech at the Howard Weil Inc. conference in New Orleans today. Baker Hughes, an oilfield services provider, compiles and publishes international rig counts. An Aramco spokesman declined to comment.
The Saudi move is “we assume for the purpose of increasing/maintaining its productive capacity,” Bill Herbert, a Houston-based analyst for Simmons, said in a report today. Simmons was founded by the late Matthew R. Simmons, a leading proponent of the “peak oil” theory that asserts the world is running out of crude.
Libyan output has dwindled to a “trickle” because of the conflict, according to the International Energy Agency. Libya was Africa’s third-largest oil producer before the conflict.
Oil fell as much as 1.2 percent in earlier trading as rebels advanced against Libyan troops loyal to Muammar Qaddafi, which dug in near his hometown of Sirte, and as international leaders met in London to forge a postwar blueprint for Libya.
“The market’s just kind of trading sideways waiting for some other piece of information, either news that the economy is worse or is going to get better or some other shoe to drop on the production side, such as will some other country become involved,” said Adam Sieminski, chief energy economist at Deutsche Bank in Washington.
Futures in New York have climbed 24 percent since anti- government protests began Feb. 15 in Libya. The market may see little room for further gains in the near future, according to Glen Ward, head of retail derivatives of London Capital Group.
“All these long positions have to be got out of at some stage, so it’s time for the market to have a correction,” Ward said. “What you have seen is basically profit-taking.”
Oil volume in electronic trading on the Nymex was 402,405 contracts as of 3:35 p.m. in New York. Volume totaled 386,621 contracts yesterday, 52 percent below the average of the past three months and the lowest level since Dec. 31. Open interest was 1.52 million contracts.
Stockpiles of crude in the U.S., the world’s biggest oil- consuming country, probably climbed to the highest level since early December last week as imports surged before gasoline demand rises before the summer vacation season, a Bloomberg News survey showed before an Energy Department report tomorrow.
Inventories climbed 1.5 million barrels from 352.8 million in the week ended March 25, according to the median estimate of 15 analysts surveyed by Bloomberg News. Imports reached a seven- week high in the seven days ended March 18.
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