Crude Oil Rises as Dollar Slips, Goldman Sachs Boosts Brent Price Forecast

Oil rose in New York as the dollar declined, boosting commodities’ appeal as an alternative investment, and Goldman Sachs Group Inc. and Morgan Stanley increased their price outlooks for crude.

Futures jumped 1.9 percent as the dollar slipped from a nine-week high against the euro after German business confidence unexpectedly stayed near a record in May. Goldman Sachs and Morgan Stanley raised their estimates for Brent oil futures, saying the conflict in Libya is eating into OPEC spare capacity.

“The dollar’s under pressure,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The upward revisions to some of the investment-bank oil forecasts may be lending a certain positive sentiment to this market.”

Crude for July delivery rose $1.89 to $99.59 a barrel on the New York Mercantile Exchange, the highest settlement since May 18. Prices have climbed 42 percent in the past year. Futures have switched direction each day for the past five sessions.

Prices pared gains from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles decreased 860,000 barrels to 368.1 million. July oil rose $1.70, or 1.7 percent, to $99.40 a barrel in electronic trading at 4:31 p.m.

Brent crude for July settlement gained $2.43, or 2.2 percent, to $112.53 a barrel on the London-based ICE Futures Europe exchange. Prices are up 58 percent in the past year.

The dollar fell 0.4 percent to $1.4105 per euro at 4:29 p.m. in New York after the German confidence report fueled bets that the European Central Bank will resume boosting borrowing costs. Yesterday, the dollar touched $1.397 per euro, the highest level since March 17.

Commodities Rise

Commodities surged after Goldman Sachs said it’s turning “more bullish” on raw materials, spurring a jump in sugar, copper, oil and other commodities.

The Thomson Reuters/Jefferies CRB Index of 19 commodities advanced as much as 1.2 percent. It was up 0.7 percent at 339.10 at 4:29 p.m. in New York. Twelve of the commodities climbed.

Goldman Sachs raised its three-month outlook for Brent oil to $115 a barrel, its six-month view to $120 and its 12-month price estimate to $130. Morgan Stanley increased its average forecast for Brent this year by 20 percent to $120 a barrel and by 24 percent for 2012 to $130 a barrel.

“It is only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supplies,” Goldman Sachs analysts led by New York- based David Greely said in a note e-mailed today.

Libyan Supply

Crude exports from Libya, holder of Africa’s biggest reserves, slumped 79 percent in March from February, as political unrest curbed shipments, official data posted on the Joint Organization Data Initiative website showed May 18.

“Oil fundamentals remain extremely constructive,” Amrita Sen, an analyst at Barclays Capital in London, said in a Bloomberg television interview with Francine Lacqua. “Libyan supply is not going to come back to the market anytime soon.”

The Organization of Petroleum Exporting Countries is unlikely to increase crude production quotas at its next meeting June 8 in Vienna, said Richard Jones, deputy executive director of the International Energy Agency, the Paris-based adviser to 28 nations.

“I would be skeptical,” he said today at a press conference in Brussels. “Knowing OPEC politics, it would be difficult to make a decision in June.”

The IEA said last week that there is a “clear, urgent need for additional supplies.” The statement suggests it may coordinate the release of emergency oil stockpiles if OPEC doesn’t raise production, the London-based Centre for Global Energy Studies said in a report yesterday.

U.S. Inventories

U.S. crude-oil inventories probably fell 1.5 million barrels, or 0.4 percent, in the seven days ended May 20 from 370.3 million the prior week, according to the median of 13 analyst estimates before an Energy Department report tomorrow. Supplies dropped after flooding along the Mississippi River limited imports and refineries increased the amount of crude they processed, the survey showed.

“Three times this year we’ve seen crude stocks fall,” said Matt Smith, a commodities analyst for Summit Energy Services Inc. in Louisville, Kentucky. “We’re not willing to move down and test the lows we’ve seen around $94 because of continued supply concerns and intermittent bouts of bullishness.”

Gasoline supplies probably gained 450,000 barrels last week from 205.9 million in the prior week, the survey showed. Consumption of the motor fuel jumped 2.5 percent to 9.05 million barrels a day during the second week in May, the biggest weekly increase since April 8.Gasoline demand typically peaks during the summer months in the U.S.

Gasoline for June delivery rose 5.47 cents, or 1.9 percent, to settle at $2.9928 a gallon on the Nymex. Futures have advanced 52 percent in the past year.

Oil volume in electronic trading on the Nymex was 523,203 contracts as of 4:29 p.m. in New York. Volume totaled 493,860 contracts yesterday, the lowest level in three weeks. Open interest was 1.53 million contracts.

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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