Oil Climbs for Second Day on Shrinking Crude Stockpiles, Stronger Economy

Oil advanced for a second day in New York as investors bet that shrinking stockpiles and signs of economic recovery in the U.S. indicate fuel demand will increase in the world’s biggest crude-consuming nation.

Futures gained as much as 1.1 percent after the industry- funded American Petroleum Institute said supplies fell the most in six weeks. An Energy Department report today may show inventories dropped for a seventh week, the longest run of declines in two years. Prices rose yesterday after U.S. housing starts surged more than economists forecast.

“We continue to see stock draws,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicts oil in New York will average $113 a barrel in the third quarter. “Crude supplies are still relatively high compared with history but it’s undoubtedly positive for oil prices.”

Crude for August delivery increased as much as $1.09 to $98.59 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.53 at 2:50 p.m. Singapore time. The contract, which expires today, rose $1.57 to $97.50 yesterday. Prices are 27 percent higher the past year. The more-actively traded September future gained 97 cents to $98.83.

U.S. crude supplies declined 5.2 million barrels to 354.2 million, the biggest drop since the week ended June 3, according to the American Petroleum Institute. The Energy Department report may show stockpiles fell 2 million barrels last week, according to a Bloomberg News survey.

Brent Crude

Brent oil for September settlement advanced as much as $1.19, or 1 percent, to $118.25 a barrel on the ICE Futures Europe exchange in London. The contract yesterday gained $1.01, or 0.9 percent, to $117.06.

U.S. inventories are about 4 percent above the average of the past five years, according to Energy Department data.

The American Petroleum Institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey. In the past four years, the indicators have moved the same direction 75 percent of the time for oil.

Gasoline supplies increased 1.96 million barrels to 210.3 million, the American Petroleum Institute said. It was the first increase in five weeks. The Energy Department report may show stockpiles fell 250,000 barrels, according to the Bloomberg survey.

Oil in New York may extend gains as prices approach an area on daily technical charts where orders to buy may be clustered, according to data compiled by Bloomberg. Crude is rising to the first so-called leading-span line on its “ichimoku cloud”, at about $99.55 a barrel today. Front-month futures also opened today’s trading above the 50-day moving average for the first time since May 4, signaling the market may climb further.

Homes, Storms

Prices surged yesterday after the Commerce Department said work began on 629,000 houses in the U.S. at an annual pace in June, up 15 percent from May and the fastest pace in five months. Reports today will show sales of existing homes also increased, according to economists surveyed by Bloomberg.

Oil is advancing as the first tropical storms of the Atlantic and Pacific hurricane seasons form. Dora became the fourth named hurricane of the Eastern Pacific in 2011 after strengthening from a tropical storm off Mexico.

The hurricane was about 240 miles (390 kilometers) south of Acapulco, Mexico, and should continue to intensify today and tomorrow as it moves west-northwest at 17 miles per hour, the National Hurricane Center said.

Bret, the second tropical storm of the Atlantic, may weaken today and could become a tropical depression by tomorrow, the center said in a separate advisory.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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