Oil Advances, Capping Eighth Straight Month of Gains, on Consumer Spending

Oil rose, capping an unprecedented eighth straight month of gains, as better-than-expected consumer spending signaled fuel demand may climb.

Futures reached a 31-month high after purchases increased in March as Americans spent more on food and fuel, according to a Commerce Department report. Equities advanced and the dollar weakened against other major currencies, boosting the appeal of commodities as an alternative investment.

“We’re getting a little liftoff off of the economic releases and also from the equities market,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois-based consulting company.

Crude for June delivery rose $1.07, or 1 percent, to $113.93 a barrel, the highest settlement since Sept. 22, 2008, on the New York Mercantile Exchange. Futures gained 6.8 percent in April and have advanced each month since August, the longest streak of increases since trading began in 1983. Prices climbed 1.5 percent this week and 34 percent in the past year.

Brent for June settlement advanced 87 cents, or 0.7 percent, to $125.89 a barrel on London’s ICE Futures Europe exchange.

Consumer spending in the U.S. rose 0.6 percent in March after a revised 0.9 percent gain the prior month that was higher than previously estimated, Commerce Department figures showed today in Washington. The increase compared with a 0.5 percent median estimate of economists surveyed by Bloomberg News.

U.S. Demand

Oil demand in the U.S., the world’s biggest oil-consuming country, is forecast to climb 1.1 percent this year to 19.4 million barrels a day, according to the latest forecast from the Energy Information Administration, the statistical arm of the U.S. Energy Department.

The Organization of Petroleum Exporting Countries’ crude output fell to a 22-month low in April as increases from Saudi Arabia failed to make up for declines in Angola and Libya, a Bloomberg News survey showed.

Production fell 92,000 barrels, or 0.3 percent, to an average 28.43 million barrels a day, the lowest level since June 2009, according to the survey of oil companies, producers and analysts. Daily output by the 11 members with quotas, all except Iraq, decreased 117,000 barrels to 25.82 million, 975,000 above their target.

Business activity in the U.S. grew less than forecast in April, at a pace that’s consistent with steady growth in the world’s largest economy. The Institute for Supply Management- Chicago Inc.’s business barometer dropped to 67.6 from March’s 70.6 level. Figures greater than 50 signal expansion, and the median forecast in a Bloomberg News survey of economists called for a decline to 68.2.

Equities Rise

The Dow Jones Industrial Average climbed 48.52 points, or 0.4 percent, to 12,811.83 at 3:07 p.m. in New York. The Standard & Poor’s 500 Index rose 0.2 percent to 1,363.03.

The Dollar Index, which tracks the U.S. currency against six major counterparts including the euro and the yen, had its biggest monthly drop since September. The index slipped 0.3 percent to 72.92, the ninth straight daily decline.

Gold futures rose to a record for a third straight day on bets that the dollar will extend its slump, and silver had the biggest monthly gain in 28 years.

“The things we’ve got driving oil higher are the weak dollar and the continued run-up in gold and silver,” said Phil Flynn, vice president of research at PFGBest in Chicago. Futures are volatile today because of light volume and the expiration of the May gasoline and heating oil contracts, he said.

Light Volume

Volume was reduced today because of a public holiday in the U.K. Electronic trading of oil on the ICE wasn’t affected. The U.K. and other countries from Germany to China will be closed May 2 for May Day.

Oil volume in electronic trading on the Nymex was 322,374 contracts as of 3:09 p.m. in New York. Volume totaled 536,591 contracts yesterday, 29 percent below the average of the past three months. Open interest was 1.6 million contracts, the highest level since a record 1.62 million on March 11.

Gasoline futures rose for a seventh day amid speculation that stockpiles will fall for an 11th consecutive week after a power outage curtailed production from three Texas refineries. Gasoline supplies dropped to the lowest level since 2009 in the week ended April 22, according to the Energy Department.

Gasoline for May delivery on the Nymex jumped 3.5 cents, or 1 percent, to $3.4648 a gallon, the highest settlement since July 14, 2008. The more active June contract increased 2.88 cents, or 0.9 percent, to $3.3984. The spread between the two contracts was 6.64 cents, more than 3 cents wider than a week ago.

Crude may rise next week as the dollar weakens after the Federal Reserve said the “moderate” economic recovery still requires record-low interest rates, a Bloomberg survey showed.

Twenty-one of 35 analysts, or 60 percent, forecast oil will increase through May 6. Nine respondents, or 26 percent, predicted prices will decline and five projected little change. Last week, 38 percent of respondents said futures would gain.

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

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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