Oil Fluctuates on U.S. Jobless Claims, Fuel Supply

Oil climbed for a second day as U.S. stocks gained and the dollar weakened against the euro on speculation that central banks will stimulate economic growth with supportive monetary policies.

Futures gained 0.9 percent after Federal Reserve Vice Chairman Janet Yellen endorsed the view that borrowing costs are likely to stay low through 2014 as the Fed misses its goal for full employment and inflation remains in check. The Bank of Japan (8301) will pursue “powerful easing” to overcome deflation, Governor Masaaki Shirakawa said today.

“Stimulus plans may be on the table again and that’s certainly supportive for commodities,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “We are moving in tandem with stocks.”

Crude for May delivery rose 94 cents to settle at $103.64 a barrel on the New York Mercantile Exchange. Prices are up 4.9 percent this year.

Brent oil for May settlement gained $1.53, or 1.3 percent, to $121.71 a barrel on the London-based ICE Futures Europe exchange.

The Standard & Poor’s 500 Index increased as much as 1.4 percent. The dollar slipped as much as 0.8 percent against the euro. A weaker dollar boosts the appeal of commodities as an alternative investment to the U.S. currency.

The Fed last month affirmed a plan, first announced in January, to hold interest rates near zero through late 2014 as the economy may not be improving enough to change the outlook for coming years.

‘Accommodative’ Stance

“I consider a highly accommodative policy stance to be appropriate in present circumstances,” Yellen said in a speech in New York after U.S. financial markets closed yesterday. She echoed Fed Chairman Ben S. Bernanke by saying unemployment will decline “only gradually.”

Oil prices fell earlier today after the Labor Department reported more Americans than forecast filed applications for unemployment benefits. Jobless claims increased 13,000 in the week ended April 7 to 380,000, the highest level since Jan. 28, the department said. The median forecast in a Bloomberg survey called for 355,000.

In Japan, Shirakawa said in Tokyo that defeating deflation and achieving sustained growth are important tasks for the BOJ. The central bank unexpectedly expanded bond purchases by 10 trillion yen on Feb. 14 and set an inflation goal of 1 percent.

Quantitative Easing

The U.S. central bank bought a total of $2.3 trillion in bonds from December 2008 to June 2011 in two rounds of purchases in a tactic that has been dubbed quantitative easing. Fed policy makers meet next on April 24 and April 25.

“People are starting to think that there is a greater chance of a third round of quantitative easing,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “QE3 will be supportive for the energy market, especially assets like oil.”

William C. Dudley, president of the Federal Reserve Bank of New York, said today that he hasn’t “seen any set of information that should suggest to me that we should change that view” on keeping interest rates low. He spoke in Syracuse, New York.

Crude also advanced today as the Bloomberg Consumer Comfort Index showed consumer confidence held last week near a four-year high as more Americans said their finances were in better shape. Euro-area industrial production also unexpectedly increased in February, according to data from the European Union’s statistics office in Luxembourg.

Rising Supplies

Oil prices fell 8 percent from Feb. 24 to April 10 amid speculation that the Fed was holding off on increasing monetary accommodation and on climbing U.S. inventories.

Markets are better supplied for the first time since 2009, the International Energy Agency said in its monthly Oil Market Report today. It cited “sluggish” global demand and a three- year high in output from the Organization of Petroleum Exporting Countries.

OPEC, in a monthly report also released today, boosted its forecast for production from outside the group and described the world market as “well-supplied.”

President Barack Obama discussed the “tightness’ in the global oil market in a video conference with French President Nicholas Sarkozy, White House press secretary Jay Carney said today. The U.S. and its allies continue to monitor the economic impact of energy costs, he said.

French Industry Minister Eric Besson said yesterday that the country is ‘‘open’’ to the possibility of a release of oil stockpiles by IEA member countries to keep prices in check.

Electronic trading volume on the Nymex was 646,168 contracts as of 3:35 p.m. in New York. Volume totaled 637,180 contracts yesterday, 1.4 percent below the three-month average. Open interest was 1.57 million.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

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

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