Oil Edges Up as U.S. Jobless Claims Fall Near Four-Month Low

Crude oil edged higher in New York after U.S. jobless claims dropped to the lowest level in almost four months, a signal that fuel consumption may increase as the weakness in the labor market fades.

Futures gained 4 cents after the Labor Department said applications for unemployment benefits fell by 24,000 to 398,000 last week, the lowest level since April 1, and contracts to buy previously owned homes also unexpectedly rose in June. Congressional leaders wrangled over proposals to avoid a default on the national debt.

“The jobless number gave us a little lift, and that was followed by the positive housing number,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There’s been a pitter-patter of better news today. Volatility will increase significantly tomorrow if there’s no agreement on the debt ceiling.”

Crude oil for September delivery settled at $97.44 a barrel on the New York Mercantile Exchange in the smallest one-day move since March 14. Futures have gained 27 percent in the past year.

Brent oil for September settlement declined 7 cents to settle at $117.36 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $19.92 a barrel to New York futures, compared with a record $22.63 on July 14.

U.S. jobless claims were less than forecast, as the median estimate of economists in a Bloomberg News survey called for a drop to 415,000. The number of contracts to purchase previously owned homes rose 2.4 percent in June as buyers tried to take advantage of lower prices and borrowing costs, figures from the National Association of Realtors also showed today.

Republican Proposal

Earlier, prices tumbled as much as 0.9 percent as the House of Representatives planned to vote today on a debt-limit- increase proposal that faces unified Democratic opposition in the Senate.

House Speaker John Boehner revised his plan to raise the debt ceiling as he gained support among fellow Republicans for a proposal that all 51 Senate Democrats and two independents pledged to oppose.

“We’re waiting for a resolution to the impasse in a white- knuckle fashion,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. The impact of the economic numbers “was limited because of the worries about a default.”

Tropical Storm Don

Prices also increased as Tropical Storm Don, currently over the central Gulf of Mexico, took aim at southeastern Texas. The National Hurricane Center in Miami issued a tropical storm warning for a 300-mile stretch of the Texas coastline, and BP Plc and Royal Dutch Shell Plc (RDSA) began shutting Gulf of Mexico oil production platforms with a combined capacity of at least 300,000 barrels a day.

About 6.8 percent of oil production and 2.8 percent of natural gas output from the Gulf of Mexico has been shut in because of Don, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.

Don, the fourth storm of the Atlantic hurricane season, was 475 miles (765 kilometers) east-southeast of Corpus Christi, Texas, heading northwest at 15 miles per hour with maximum winds of 45 mph, according to a bulletin at 1 p.m. local time. The warning zone extended from Port Mansfield, about 45 miles north of the Mexican border, to San Luis Pass, about 75 miles south of Houston.

“If the storm strengthens we could definitely see a big market move,” said Phil Flynn, vice president of research at PFGBest in Chicago. “So far there hasn’t really been a reaction.”

Platform Shut-Ins

Storms are watched closely because they are a threat to oil and natural gas interests in the Gulf, home to 31 percent of U.S. oil output and coastal refineries account for 7.61 million barrels a day, or 42 percent of U.S. capacity.

BP shut production at its Atlantis platform, the company said in a recorded message. Atlantis can produce 200,000 barrels a day of crude and 180 million cubic feet of gas, Interior Secretary Ken Salazar said in a briefing last year.

Shell executed a “full shut-in of production” at its Perdido Spar platform, which began production in March 2010 and has a peak production capacity of 100,000 barrels a day of oil equivalents, according to the company’s website. Shell expects to evacuate 195 people from the extreme southwest of its Gulf of Mexico operations by the end of the day, according to the statement.

OPEC Exports

Oil exports from the Organization of Petroleum Exporting Countries will increase through to the middle of August on demand from Asian refiners, according to tanker-tracker Oil Movements.

Shipments will increase 0.5 percent to 22.93 million barrels a day in the four weeks to Aug. 13, the Halifax, England-based researcher said today in a report. That compares with 22.81 million barrels in the period to July 16. The data excludes Ecuador and Angola.

Oil volume in electronic trading on the Nymex was 373,605 contracts as of 2:47 p.m. in New York. Volume totaled 516,140 contracts yesterday, 31 percent below the average of the past three months. Open interest was 1.51 million contracts.

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