Crude Oil Rises to Nine-Month High Amid Optimism on U.S. Economy, Greece

Oil climbed to a nine-month high in New York as signs of an improving U.S. economy and progress on a bailout for Greece bolstered the outlook for fuel demand.

West Texas Intermediate crude rose 0.9 percent to cap a weekly gain of 4.6 percent as the index of U.S. leading indicators advanced in January for a fourth month. Germany’s government signaled that finance ministers may be ready to support a 130 billion-euro ($171 billion) rescue for Greece.

“We’ve had a strong week and there’s strong upward momentum,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The headlines are what’s driving this market and if they point to a better economy, prices will rise. It looks like a Greek deal is going to finally get done.”

Oil for March delivery rose 93 cents to $103.24 a barrel on the New York Mercantile Exchange, the highest settlement price since May 10. The gain capped the biggest weekly advance since Dec. 23.

Brent oil for April settlement dropped 53 cents, or 0.4 percent, to $119.58 a barrel on the London-based ICE Futures Europe exchange. The contract touched $120.70, the highest level since June 15, before slipping. Brent’s premium to April WTI narrowed $1.49 to $15.98 a barrel.

WTI touched $103.57 and is “approaching $103.74, the high from early January, which is a tempting target,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “Brent is retreating after taking out its old highs.”

Leading Indicators

The Conference Board’s gauge of the outlook for the next three to six months increased 0.4 percent. The New York-based group revised its December change upward to 0.5 percent.

Applications (INJCJC) for unemployment insurance payments in the U.S. dropped 13,000 in the week ended Feb. 11 to 348,000, the Labor Department said yesterday. The Commerce Department reported yesterday that U.S. builders broke ground on more homes than forecast in January and the Federal Reserve Bank of Philadelphia’s general economic index rose this month.

“The U.S. economy is in better shape than had been feared,” said Eugen Weinberg, the head of commodities research at Commerzbank AG in Frankfurt. “The current price action is a liquidity and investment-driven rally on the back of U.S. economic sentiment and improving equity markets, fueled further by fears of possible supply cutbacks.”

Conference Call

German Chancellor Angela Merkel, Italian Prime Minister Mario Monti and Greek Prime Minister Lucas Papademos discussed a second Greek bailout on a conference call and are confident that euro-area finance ministers will “find a solution for open questions” on Feb. 20, Steffen Seibert, Merkel’s chief spokesman, said in an e-mailed statement.

The European debt crisis that began in Greece has spread to Ireland, Portugal, Italy and Spain.

U.S. fuel demand dropped to the lowest level for January in 17 years, the American Petroleum Institute said. Total deliveries of petroleum products fell 5.7 percent to 18 million barrels a day from January 2011. Use of ultra-low-sulfur diesel, the type used on highways, climbed 4.6 percent. Gasoline use dropped 0.2 percent.

“The U.S. economy is looking pretty strong and a lot of people are looking for demand to trend along higher, but that has yet to happen,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Consumer preferences changed when gasoline prices surged in 2008 and automakers responded by making more efficient vehicles. Gasoline is still expensive and consumers would rather spend their money on something else.”

Iran Concern

Oil may rise next week on concern that shipments will be disrupted by tension between Iran and the West over the country’s nuclear program, a Bloomberg News survey showed. Fifteen of 37 analysts, or 41 percent, forecast oil will climb through Feb. 24. Twelve respondents, or 32 percent, predicted prices will decline and 10 said there will be little change.

Iran seeks negotiations about its nuclear program at the “earliest possibility,” the country’s top nuclear negotiator, Saeed Jalili, wrote in a Feb. 14 letter to the EU’s foreign policy head Catherine Ashton. U.S. Secretary of State Hillary Clinton and Ashton, after meeting at the State Department in Washington, said they and allies are reviewing the letter to determine next steps.

Daily volumes in Brent crude call options above the market price have risen above 25,000 on four days during the past two weeks in New York, signaling an increase in bets on a possible price rally.

Electronic trading volume on the Nymex was 679,422 contracts as of 3:19 p.m. in New York. Volume totaled 660,975 yesterday. Open interest was 1.48 million contracts.

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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