Oil rose for the first time in seven days in New York as China pledged to boost the nation’s economy and Goldman Sachs Group Inc. said the balance between the supply and demand of crude is tightening.
Futures climbed 1.2 percent from the lowest level in more than six months after Chinese Premier Wen Jiabao said his country will focus more on bolstering growth. This weekend, leaders of the Group of Eight nations urged Greece to stay in the euro area and to maximize economic expansion. The extent of oil’s drop was unwarranted, Goldman said in a report.
“The statements out of China and the G-8 meeting are supportive,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’ve come a long way and a lot of poor economic data has already been priced in. The G-8 statements pointed to stimulus, not just more unvarnished austerity.”
Crude oil for June delivery rose $1.09 to settle at $92.57 a barrel on the New York Mercantile Exchange. It was the biggest gain since May 1. Prices tumbled 1.2 percent on May 18 to $91.48, the lowest close since Oct. 26. Oil is down 6.3 percent this year.
June futures expire tomorrow. The more active July contract climbed $1.06, or 1.2 percent, to settle at $92.86.
Brent oil for July settlement increased $1.67, or 1.6 percent, to end the session at $108.81 a barrel on the London- based ICE Futures Europe exchange. It was the biggest gain since April 2. The European benchmark contract was at $15.95 premium to West Texas Intermediate oil traded in New York, based on July contracts, up from $15.34 on May 18.
Wen called for “putting stabilizing growth in a more important position” and didn’t mention inflation concern in remarks published yesterday by the official Xinhua News Agency. China may announce stimulus actions in the near term, according to a front-page commentary today in the China Securities Journal, which is published by Xinhua.
“Chinese growth continues to be sustained and robust,” said Christopher Bellew, senior broker at Jefferies Bache Ltd. in London. “The emphasis for oil prices is ultimately where demand is growing the most strongly, such as China and India. Prices seem to have found a bottom at last.”
The G-8 leaders “affirm our interest in Greece remaining in the euro zone while respecting its commitments,” according to a statement by the G-8 on the global economy released by the White House. The leaders met at Camp David, Maryland, U.S. President Barack Obama’s retreat outside Washington.
The European sovereign debt crisis that began in Greece and then moved to Ireland, Portugal, Italy and Spain has reduced economic growth and fuel consumption.
“Optimism is emerging that Europe will skate past the thin ice they are on,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We are seeing a shift to a more hopeful outlook, not a change in the fundamentals.”
The Standard & Poor’s 500 Index gained 1.4 percent and the Dow Jones Industrial Average increased 0.9 percent.
China is the second-biggest crude consuming country after the U.S. The countries using the euro accounted for about 12 percent of global oil demand in 2010, according to BP Plc (BP/)’s Statistical Review of World Energy released in June.
Demand is growing “despite concerns over the softening economic data,” David Greely, head of energy research at Goldman Sachs in New York, said in a report e-mailed today. “The supply of oil actually available to the market is increasingly constrained by the inability of Iran to market its oil owing to the effects of U.S. and European sanctions.”
International sanctions against Iran over its nuclear program have hampered crude exports from the second-largest producer in the Organization of Petroleum Exporting Countries. The European Union is set to ban purchases of Iranian crude starting in July.
Last month, representatives from the U.S., Russia, China, the U.K., France and Germany held their first international meeting with Iran on its nuclear program in 15 months. They agreed to resume the negotiations in Baghdad on May 23.
Oil in New York has long-term technical support at $89.83 a barrel, according to data compiled by Bloomberg. On the weekly chart, that’s the 50 percent Fibonacci retracement of the intraday decline to $32.40 in December 2008 from a record high of $147.27 in July that year. Futures last traded at that price in November 2011.
Crude oil’s relative strength index remained below 30, signaling it may be oversold. The 14-day RSI has been below 30 since May 11, signaling further losses may not be sustainable. Buy orders tend to be clustered near chart-support levels. The RSI was at 27 today.
Electronic trading volume on the Nymex was 361,269 contracts as of 3:06 p.m. in New York. Volume totaled 561,992 contracts May 18, 5.5 percent below the three-month average.
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