Oil climbed from the lowest in almost two months in New York, trimming the biggest weekly decline in a year, on speculation a drop below $100 a barrel was exaggerated.
Futures increased as much as 1.2 percent after sliding 8.6 percent yesterday following worse-than-expected U.S. economic data. Oil broke through the lower Bollinger Band, a technical signal which typically indicates prices are poised to rise. A Labor Department report today may show the U.S. generated fewer jobs in April than in March.
“It could be a relief rally after an aggressive sell-off yesterday,” said Serene Lim, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore, who predicted oil will average $111 this year. “Traders will be very cautious at this time because tonight’s payroll data will be something to watch out for.”
Crude for June delivery gained as much as $1.15 to $100.95 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $100.29 at 1:45 p.m. Singapore time. Yesterday, it fell $9.44 to $99.80, the lowest since March 16 and the biggest percentage drop since April 20, 2009.
Oil last closed below the bottom Bollinger band on Jan. 25. Prices rose 7 percent over the next five days. Crude’s relative strength index, a measure of how rapidly prices are rising or falling, slipped to 32 yesterday, the lowest since Aug. 24. A reading of 30 typically indicates the commodity is set to climb.
Prices are down 12 percent this week, the most since the week ended May 7, 2010, and are 31 percent higher the past year. Oil plunged yesterday after a surprise increase in U.S. jobless claims and a gain in the dollar.
Applications for jobless benefits in the U.S. jumped by 43,000 to 474,000 in the week ended April 30, Labor Department figures showed. Economists in a Bloomberg News survey estimated they would fall to 410,000. A report today may show employers in the world’s largest economy hired 185,000 additional workers in April, compared with 216,000 in March.
The Labor Department report today is “the most important data we’ve had all week,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted oil will average $100 this year. “The market has started to realign itself with proper fundamentals.”
The Dollar Index, a measure of the greenback against six major currencies, surged 1.5 percent yesterday to 74.12 in the biggest one-day gain since October. It was at 74.10 today. A stronger dollar reduces the attractiveness to investors of commodities, which dropped the most since 2009.
Brent crude for June settlement added as much as $1.85, or 1.7 percent, to $112.65 a barrel, on the London-based ICE Futures Europe exchange. Yesterday, it plunged $10.39, or 8.6 percent, to $110.80, the lowest since March 16.
The European benchmark traded at a premium of $11.66 a barrel to U.S. futures today. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21. The spread averaged 76 cents last year.
Oil in New York may find support around the $99 to $96 level as it’s near the 50 percent Fibonacci retracement level, said Stephen Schork, president of The Schork Group Inc. a Villanova, Pennsylvania-based consultant. That level is now at $97.44 a barrel based on Bloomberg data over a six-month period.
Fibonacci analysis is based on the theory that securities tend to rise or fall by specific percentages after reaching new highs or lows.
The price of the most actively traded oil options, June $100 puts, rose 1,305 percent. The contract, which gives the holder the right to sell crude for June delivery at $100 a barrel, climbed to $2.95 yesterday from 21 cents on May 4, with 14,904 traded. It was at $2.73 today.
Oil has gained 10 percent in New York this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya, Algeria, Bahrain, Iran, Oman, Syria and Yemen. The Obama administration said it will permit Libyan rebels to draw on the $33 billion in Libyan assets frozen by U.S., as allied nations opposing Muammar Qaddafi looked for further measures to force him from power.
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