Crude Rises on S&P Gain as Brent Premium Shrinks

West Texas Intermediate crude rose for a third day as the Standard & Poor’s 500 Index advanced to an intraday record, bolstering speculation that fuel consumption will climb. Brent oil’s premium to New York futures shrank to the smallest level since June.

Futures increased 0.5 percent as the S&P 500 gained after Chinese imports grew, Japan reiterated its stimulus plans and on speculation earnings will beat estimates. Oil fell earlier when the Energy Information Administration said supplies grew 250,000 barrels to 388.9 million last week, the most since July 1990. The jump was less than the 1.5 million barrels forecast by analysts in a Bloomberg survey.

“A gain in the S&P is seen as an indication of a rising GDP and in turn increasing fuel demand,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. ‘

WTI crude for May delivery rose 44 cents to $94.64 a barrel on the New York Mercantile Exchange, the highest settlement since April 2. The volume of all futures traded was 8.8 percent less than the 100-day average for the time of day at 3:45 p.m.

Brent oil for May settlement declined 44 cents, or 0.4 percent, to end the session at $105.79 a barrel on the London- based ICE Futures Europe exchange. The volume of all Brent futures was 0.3 percent above than the 100-day average.

The European benchmark was at a premium of $11.15 to WTI down from $12.03 at yesterrday’s close and the narrowest level since June 21 based on settlement prices.

Equity Rally

The S&P 500 gained as much as 1.3 percent, topping the previous high set in October 2007. The Dow Jones Industrial Average climbed as much as 1 percent.

Chinese imports rose 14.1 percent in March from the year earlier, leaving the nation with an unexpected trade deficit. Bank of Japan (8301) Governor Haruhiko Kuroda said today that the unprecedented stimulus announced by the BOJ at his first meeting as governor last week is enough to achieve a 2 percent inflation goal and stimulate the economy.

“Any strength we’re seeing in oil today is coming from the equity market,” said John Kilduff, a partner at Again Capital LLC, a New York energy hedge fund. “The inventory report was neutral to bearish. Inventories are extraordinarily high, even if the gain was smaller than we expected.”

U.S. Output

Crude production rose 30,000 barrels to 7.18 million, the highest level since July 1992, according to the EIA, the Energy Department’s statistical unit. Output has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in the central U.S.

Stockpiles of crude at the Cushing, Oklahoma, storage hub increased 889,000 barrels to 50.1 million last week, according to the EIA, the statistical arm of the Energy Department.

“Inventories are at historically high levels, which are hard to ignore,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “The fundamentals are putting downward pressure on prices, but the market remains resilient.”

Refineries operated at 86.8 percent of capacity, up 0.5 percentage point from the seven days ended March 29. Units are often restarted in the spring after being idled for maintenance in late winter as attention shifts away from heating oil and before the summer when gasoline consumption peaks.

Gasoline Inventories

Stockpiles of gasoline increased 1.7 million barrels to 222.4 million, according to the EIA. It was the first gain in two months.

Gasoline for May delivery tumbled 7.73 cents, or 2.6 percent, to settle at $2.8651 a gallon on the Nymex. Volume was 92 percent above the 100-day average for the time of day.

“Gasoline inventories are back at comfortable levels after this report,” Kilduff said. “Gasoline is the seasonal leader and should keep a lid on things.”

OPEC trimmed its estimate for global oil demand growth this year in a report today. Consumption will rise by 800,000 barrels a day, or 0.9 percent, this year, revised down from 840,000 last month, the Organization of Petroleum Exporting Countries said in its Monthly Oil Market Report. Demand will increase to 89.66 million barrels a day in 2013 versus 88.87 million last year, the 12-member group projected.

$100 Barrel

Crude will trade in Europe at about $100 a barrel this year as demand on the continent continues to decline, said Ibrahim al-Muhanna, an adviser to Saudi Arabia’s oil minister. Markets will be balanced in 2013 as China leads nations where demand is increasing, Muhanna said at a meeting of the Organization of Arab Petroleum Exporting Countries in Kuwait today.

Saudi Arabian Oil Minister Ali al-Naimi said March 18 that oil at $100 a barrel is a “reasonable” price that won’t choke global economic growth.

Implied volatility for at-the-money WTI crude options expiring in June was 19 percent, down from 19.2 percent yesterday. The figure has slipped from 24.7 percent on Feb. 21.

Electronic trading volume on the Nymex was 413,931 contracts as of 3:45 p.m. It totaled 577,232 contracts yesterday, 0.4 percent below the three-month average. Open interest was a record 1.77 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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.