Crude Oil Rises to One-Week High in New York After Consumer Spending Gains

Oil rose to the highest level in more than a week in New York, climbing with equities on optimism that the economy will expand and a report that U.S. consumer spending gained in July.

Futures jumped 2.2 percent after the Commerce Department said purchases increased the most since February. Federal Reserve Chairman Ben S. Bernanke said Aug. 26 in Jackson Hole, Wyoming, that the economic recovery is likely to improve in the second half of the year. The Standard & Poor’s 500 Index advanced as much as 2.8 percent.

“The consumer spending numbers looked better than expected,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “People interpreted Bernanke’s comments positively because the chairman is not pushing the panic button.”

Crude for October delivery rose $1.90 to $87.27 a barrel on the New York Mercantile Exchange, the highest settlement since Aug. 17. Prices have fallen 4.5 percent this year.

Brent oil for October settlement gained 52 cents, or 0.5 percent, to $111.88 a barrel on the London-based ICE Futures Europe exchange. The European benchmark traded at a premium of $24.61 to U.S. West Texas Intermediate futures, compared with a record $26.21 on Aug. 19.

Consumer Spending

The July increase in spending followed a 0.1 percent decline in June. The median estimate of 74 economists surveyed by Bloomberg News called for a 0.5 percent advance. Incomes grew 0.3 percent and the savings rate fell to a four-month low.

“As long as we look like we’re on the road to recovery, crude is going to be on the road to $100 once again,” said Carl Larry, director of energy derivatives and research with Blue Ocean LLC in New York. “We’re seeing a little bit of hope in the equity market and that’s helping carry us here. Everybody’s trying to take what Bernanke said on Friday and digest it.”

Bernanke said last week that the central bank still has tools to stimulate a recovery that has been weaker than forecast. He didn’t give details on the measures the Fed might take or signal when or whether policy makers might deploy them.

The S&P 500 rose 2.7 percent to 1,208.39 at 3:49 p.m. in New York, and the Dow Jones Industrial Average advanced 236.13 points, or 2.1 percent, to 11,520.67.

“We’re seeing equities looking up and WTI following that,” said Matt Smith, a commodities analyst for Summit Energy Services Inc. in Louisville, Kentucky. “Consumer spending makes up 70 percent of GDP. It’s an indicator of an expanding economy which has a positive reflection on oil demand.”

Housing Purchases

The number of contracts to purchase previously owned U.S. homes fell 1.3 percent in July, the first decline in three months, in a sign that lower prices and borrowing costs aren’t attracting buyers. The drop followed a 2.4 percent gain the previous month, according to a report today from the National Association of Realtors in Washington. A 1 percent decline was the median forecast in a Bloomberg News survey of 40 analysts.

Refineries along the East Coast were working to restore normal operations after Hurricane Irene passed through the region over the weekend. The storm killed at least 28 people from Puerto Rico to Connecticut, sent rivers to near-record heights and knocked out power to more than 4 million customers.

ConocoPhillips is attempting to start an alkylation unit at its 238,000 barrel-a-day Bayway refinery in New Jersey after shutting it because of the storm, and Sunoco Inc. shut a crude unit at its 355,000-barrel-a-day Philadelphia refinery yesterday after pumps in a tank farm that supply the unit flooded because of Irene, according to a people familiar with the plants’ operations.

Hess, NuStar

Hess Corp. said yesterday its Port Reading refinery in New Jersey returned to near normal rates. NuStar Energy LP aimed to start its Paulsboro, New Jersey, plant today, according to the company. PBF Energy Co. said yesterday it ran its New Jersey and Delaware plants “all through the storm.” ConocoPhillips (COP) said its Trainer, Pennsylvania, refinery “continues to operate” in an update on the company website today.

Some of the Libyan oil output lost during an armed conflict with Muammar Qaddafi’s regime will resume within three weeks, Al Jazeera Aug. 27, citing Nouri Balroin, the head of Libya’s National Transitional Council’s production unit. A three-stage plan will restore the flow of oil to 1.6 million barrels a day within 15 months, he said, according to the Qatar-based network.

The country’s output fell to 100,000 barrels a day in July, less than 10 percent of the amount Libya pumped in January, before the uprising, a Bloomberg News survey showed.

Net-long positions in crude oil traded in New York gained 0.3 percent to 143,195, the first increase after four weeks of declines, according to data from the Commodity Futures Trading Commission’s Aug. 26 Commitments of Traders report.

Oil volume in electronic trading on the Nymex was 341,502 contracts as of 3:12 p.m. in New York. Volume totaled 468,231 contracts Aug. 26, 31 percent below the average of the past three months. Open interest was 1.48 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.