Oil Rises to One-Month High on Manufacturing Index, Europe Debt Optimism

Crude oil rose to a one-month high in New York after manufacturing in the Philadelphia area rebounded and on reports European Union officials have come up with a plan for the region’s debt crisis, bolstering the euro.

Futures advanced 0.7 percent as the Federal Reserve Bank of Philadelphia’s general economic index rose to 3.2 from minus 7.7. Euro-area leaders may accept a temporary Greek default and ease the terms on bailouts to cash-strapped nations. Prices also rose after the International Energy Agency said it won’t extend a release of oil supplies.

“The Philly Fed numbers fed into underlying hopefulness about the economy,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “It looks like Europe has come to an agreement about Greece, and with that prospects for the region’s economy and fuel demand will improve.”

Crude for September delivery rose 73 cents to $99.13 a barrel on the New York Mercantile Exchange, the highest settlement since June 14. Futures have increased 29 percent in the past year.

Brent crude oil for September settlement declined 64 cents, or 0.5 percent, to end the session at $117.51 a barrel on the London-based ICE Futures Europe exchange.

The index of manufacturing in the area covering eastern Pennsylvania, southern New Jersey and Delaware was expected to climb to 2, according to the median of 57 economist forecasts in a Bloomberg News survey. Positive readings in the index signal growth.

Leading Economic Indicators

The Conference Board’s index of U.S. leading economic indicators climbed 0.3 percent in June after a 0.8 percent gain in May, the New York-based research group said today. Economists projected a 0.2 percent rise in June, according to the median forecast in a Bloomberg News survey.

The Standard & Poor’s 500 Index advanced 1.5 percent to 1,345.74, and the Dow Jones Industrial Average increased 1.3 percent to 12,731.68.

The euro strengthened as European leaders arrived in Brussels seeking solutions for the sovereign debt crisis. Heads of government may cut the interest rates on loans to Greece, Portugal and Ireland to 3.5 percent and double the repayment period to at least 15 years. Europe’s main rescue fund may get the power to buy bonds from investors, help countries recapitalize banks and offer precautionary lines of credit.

The euro increased 1.3 percent to $1.4396, and touched $1.4417, the highest level since July 6.

“The weak dollar is giving oil the push to run back above $100,” said Stephen Schork, president of the Villanova, Pennsylvania-based Schork Group Inc.

Washington Discussions

Discussions about a broad U.S. budget agreement intensified after a bipartisan group of senators proposed a $3.7 trillion deficit-reduction plan and President Barack Obama embraced it. The Senate’s third-ranking Republican leader, Lamar Alexander of Tennessee, endorsed the approach. House Republican leaders, who have denounced proposals for tax increases, didn’t rule out the framework from the so-called Gang of Six senators.

“There’s increasing optimism that there will be agreement to a debt deal, which is good for the economic outlook,” said Peter Beutel, president of Cameron Hanover Inc., a trading advisory company in New Canaan, Connecticut.

The IEA said on June 23 it would offer 60 million barrels of oil to make up for exports choked off by armed conflict in Libya. The action was the third time the agency has coordinated the use of emergency stockpiles since it was founded in 1974. The first was during the 1991 Persian Gulf War and the second in 2005 when Hurricane Katrina struck the Gulf of Mexico.

“There’s growing tightness in the market and no resolution to the conflict in Libya is in sight,” Kilduff said.

Libyan Output

The Libyan revolt, which began in February, has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell 50,000 barrels, or 25 percent, to 150,000 barrels a day last month, a Bloomberg News survey showed, the lowest amount in yearly data since 1962. It pumped 1.59 million barrels in January, before the uprising.

“The IEA barrels are needed right now,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The recent inventory declines show that there’s obviously demand for higher-quality crude grades.”

U.S. crude-oil stockpiles fell 3.73 million barrels to 351.7 million last week, the Energy Department said in a report yesterday. It was the seventh-straight drop, the longest stretch of inventory declines in two years.

Nigerian Shipments

Nigeria, the largest oil producer in Africa, is scheduled to export 2 million barrels a day of 14 major crude grades in September, the lowest in six months, according to loading plans obtained by Bloomberg News. Daily shipments for September will be 4.2 percent less than August.

Oil volume in electronic trading on the Nymex was 486,125 contracts as of 3:05 p.m. in New York. Volume totaled 516,130 contracts yesterday, 23 percent below the average of the past three months. Open interest was 1.48 million contracts, the lowest level since January.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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

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