Crude Oil Advances to Recoup Post-IEA Losses as Euro Gains Against Dollar
Oil gained 0.7 percent as the euro climbed to the highest level in almost three weeks against the U.S. currency after Greek lawmakers backed a plan to resolve the debt crisis, boosting the appeal of dollar-priced commodities. The quarterly decline of 11 percent was the worst performance since 2008.
“The surprise of the IEA release has been factored in and we’ve moved beyond it,” said Peter Beutel, president of Cameron Hanover Inc., an energy-advisory company in New Canaan, Connecticut. “We have since been responding to things that have happened with Greece and the dollar.”
Crude for August delivery rose 65 cents, or 0.7 percent, to $95.42 on the New York Mercantile Exchange, 1 cent above the settlement price on June 22, the day before the IEA announcement. Prices have risen 4.4 percent this year and 26 percent in the past year.
Brent oil for August settlement rose 8 cents to $112.48 a barrel on the London-based ICE Futures Europe exchange. The European benchmark, which fell 4.2 percent in the second quarter, traded at a premium of $17.06 to New York-traded West Texas Intermediate. The spread reached a record $22.29 a barrel on June 15.
The IEA said June 23 that its members would release 60 million barrels of oil from strategic reserves over 30 days beginning at the end of this week to make up for a Libyan production shortfall and curb high prices. Half the crude will come from the U.S. Strategic Petroleum Reserve.
The euro gained 0.5 percent to $1.4417 at 3:50 p.m. in New York. Earlier, it touched $1.4538, the highest level since June 10, on prospects the European Central Bank will increase interest rates next week to reduce inflation and as the risk of an immediate Greek debt default subsides.
Greek Prime Minister George Papandreou won approval of a second bill to authorize his 78 billion-euro ($113 billion) package of budget cuts and asset sales, a key to receiving further international aid.
“The dollar is weaker, which has supported oil,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York.
The Standard & Poor’s 500 Index increased 0.8 percent to 1,317.76 at 3:11 p.m. in New York, and the Dow Jones Industrial Average rose 125.75 points, or 1 percent, to 12,387.17.
Earlier, futures retreated 0.9 percent after the Labor Department reported that jobless claims fell less than expected in the week ended June 25 and after crude failed to breach technical resistance at the 200-day moving average.
August oil faces resistance at about $96.05, the 200-day moving average, and $96.20, the middle of a Bollinger chart, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
“Markets are thin and easily moved as people are shutting down for the long weekend,” he said. U.S. financial markets will be closed July 4 for the Independence Day holiday.
Oil volume in electronic trading on the Nymex was 472,834 contracts as of 3:13 p.m. in New York. Volume totaled 639,491 contracts yesterday, 15 percent below the average of the past three months. Open interest was 1.53 million contracts.
New York futures capped their biggest two-day rally in seven weeks yesterday after the U.S. Energy Department said supplies dropped almost three times as much as forecast last week. Stockpiles fell 4.38 million barrels to 359.5 million.
The Organization of Petroleum Exporting Countries’ crude output rose for a third straight month in June as Saudi Arabia boosted production by 3.2 percent to a 32-month high, a Bloomberg News survey showed.
Total OPEC output increased by 210,000 barrels, or 0.7 percent, to average 29.105 million barrels a day, the highest level since February, according to the survey of oil companies, producers and analysts. Daily output by the 11 members with quotas, all except Iraq, climbed 180,000 barrels to 26.4 million, 1.555 million barrels above their target.
Saudi Arabia, OPEC’s biggest producer, produced 9.21 million barrels a day in June, the highest level since October 2008 and an increase of 285,000 from May. Nigeria, Iraq and Kuwait also boosted production, while the other members cut output or left it unchanged from May, the survey showed.
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