West Texas Intermediate crude climbed to a two-month high after a report showed the U.S. economy expanded in the third quarter at a faster rate than previously estimated.
Futures rose 0.3 percent, capping a weekly gain of 2.8 percent. Gross domestic product increased at a 4.1 percent annualized rate, up from a previous estimate of 3.6 percent, Commerce Department figures showed. The Federal Reserve said Dec. 18 that it will taper its bond-buying program amid improved prospects for the job market. A government report this week showed fuel use was at the highest level since 2008.
“The economy is improving,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The Fed decision was a vote of confidence in the economy and for future fuel demand.”
WTI for February delivery rose 28 cents to $99.32 a barrel on the New York Mercantile Exchange. It was the highest settlement for a contract closest to expiration since Oct. 18. The volume of all futures traded was 35 percent below the 100-day average at 3:27 p.m.
Brent crude for February settlement jumped $1.48, or 1.3 percent, to end the session at $111.77 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since Dec. 4. The volume of all futures traded was 28 percent lower than the 100-day average.
The European benchmark grade settled at a $12.45 premium to WTI, up from $11.46 yesterday. The spread widened to $19.38 during trading on Nov. 27, the most since March.
The Commerce Department was projected to report a 3.6 percent increase in GDP, according to the median forecast of 72 economists surveyed by Bloomberg.
Consumer purchases, which account for almost 70 percent of the economy, increased 2 percent, more than the previously reported 1.4 percent, the revised data showed.
“Optimism about the U.S., as evinced by today’s GDP numbers, is the primary focus today,” said Tom Finlon, the Jupiter, Florida-based director of Energy Analytics Group LLC. “You’re seeing the strongest impact on the gasoline market.”
Gasoline for January delivery climbed 4.3 cents, or 1.6 percent, to close at $2.7831 a gallon on the Nymex. It was the highest settlement since Sept. 9.
Ultra low sulfur diesel futures for January delivery increased 4.75 cents, or 1.6 percent, to end the session at $3.0781 a gallon in New York. It was the highest settlement since Sept. 13.
The Fed is trimming monthly bond purchases to $75 billion from $85 billion, starting in January, Chairman Ben S. Bernanke said Dec. 18. The central bank will continue to curb the program, eventually ending it in December 2014, according to the median forecast in a Bloomberg survey of 41 economists.
“Improvement in the U.S. economy is clear,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a London-based consultant. “That should offset any small negative impact from tapering. It has taken a few months for the market to acknowledge the upside surprise from global oil demand.”
The Standard & Poor’s 500 Index climbed 0.6 percent, and the Dow Jones Industrial Average gained 0.4 percent.
The 14-day relative strength index for WTI reached 62.6547, the highest reading since August, according to data compiled by Bloomberg. Investors typically start selling contracts when the reading is more than 70, a sign a market is overbought. WTI settled above the 200-day moving average for the first time since Oct. 21.
“The RSI for oil is in the 60s so there’s plenty of upside potential,” Yawger said.
U.S. fuel consumption surged 13 percent to 21 million barrels a day last week, the highest level since April 2008, an Energy Information Administration report on Dec. 19 showed. Crude stockpiles fell 2.94 million barrels to 372.3 million in the seven days ended Dec. 13, data from the EIA, the Energy Department’s statistical arm, show.
“Increasing demand will follow the economic growth,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “You won’t see the full impact of the improved outlook until everyone is back to work with the end of the holidays.”
Implied volatility for at-the-money WTI options expiring in February was 14 percent, down from 15.1 yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 322,278 contracts at 3:27 p.m. It totaled 487,319 contracts yesterday, 13 percent below the three-month average. Open interest was 1.6 million contracts, the lowest level since Feb. 5.
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