WTI Crude Advances to Four-Week High on Economic Data

West Texas Intermediate crude reached a four-week high, gaining with equities on consumer confidence and improvement in the U.S. housing market.

Futures surged 1.8 percent and the Standard & Poor’s 500 Index rebounded from the worst slump since June. The Conference Board’s consumer confidence index climbed in January and the S&P/Case-Shiller index of property prices in 20 cities increased the most in almost eight years. Oil was also boosted by speculation that the Federal Reserve will trim its bond buying more slowly after a report that durable-goods orders dropped in December. The Fed started a two-day meeting today.

“Crude is up on the combination of a rebound in equities and the poor durable goods,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The durable goods data reduces the chances of the Fed aggressively tapering stimulus.”

WTI for March delivery increased $1.69 to $97.41 a barrel on the New York Mercantile Exchange. It was the highest settlement since Dec. 31. The volume of all futures traded was 13 percent lower than the 100-day average at 4:38 p.m.

Prices were little changed from the settlement after the American Petroleum Institute reported crude supplies rose 4.75 million barrels last week. WTI climbed $1.52, or 1.6 percent, to $97.24 a barrel at 4:36 p.m. in electronic trading. It was $97.28 before the report was released at 4:30 p.m.

Brent for March settlement advanced 72 cents, or 0.7 percent, to end the session at $107.41 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.3 percent below the 100-day average. The European benchmark grade closed at a $10 premium to WTI, down from $10.97 yesterday. The spread settled at the narrowest spread since Nov. 7.

Equities Rebound

The S&P 500 and the Dow Jones Industrial Average increased 0.6 percent each.

The Conference Board’s consumer-confidence index rose to 80.7 in January from a revised 77.5 in December, the New York-based private research group said today. The median forecast in a Bloomberg survey of economists was 78. The S&P/Case-Shiller index climbed 13.7 percent in November from a year earlier, the biggest 12-month gain for the housing gauge since February 2006, a report from the group showed today in New York.

Bookings for goods meant to last at least three years fell 4.3 percent after a 2.6 percent gain in November that was smaller than previously reported, a Commerce Department report showed in Washington. The median estimate in a Bloomberg survey was for a 1.8 percent advance.

Fed Meeting

The Fed’s monetary-policy meeting beginning today is the last one under Chairman Ben S. Bernanke, who leaves his post on Jan. 31. The central bank will probably reduce its monthly bond purchases in $10 billion increments over the next six meetings before announcing an end to the program no later than December, according to a Bloomberg survey this month.

“There’s been a strong correlation between oil and equities recently,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Investors are looking at the equity market as a demand indicator. We’re also waiting for the Federal Reserve to see if they will announce more tapering.”

The spread between WTI and Brent approached the narrowest level in more than two months on speculation that cold weather in the U.S. will bolster demand for barrels at Cushing, Oklahoma, the delivery point for crude traded on the Nymex.

“The spread is being pushed by greater weather-related demand for U.S. crude,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “More crude is flowing out of Cushing to meet refinery demand for distillate production.”

Winter Storm

A wave of arctic cold froze the U.S. Midwest as a wintry storm coated the South with ice and snow and contributed to almost 3,000 flight cancellations. The storm was touched off by a new wave of polar air pushing deep into the eastern U.S., where it has kept temperatures below zero Fahrenheit (minus 18 Celsius) from Minneapolis to Chicago, triggered winter storm warnings and advisories from Texas to New Jersey and created subzero wind chills from North Dakota to western New York.

January is on track to be the coldest month of the 21st century in the contiguous U.S. in terms of natural gas-weighted heating-degree days.

An Energy Information Administration report tomorrow will probably show that U.S. crude stockpiles rose 2.25 million barrels last week to 353.5 million, according to the median of 10 analyst estimates in a Bloomberg survey.

Fuel Stockpiles

Supplies of distillate fuel, a category that includes heating oil and diesel, slipped 2.55 million to 118.2 million, the survey showed. Gasoline inventories probably climbed 1.6 million barrels to 236.9 million, which would be the highest level since February 2011.

Implied volatility for at-the-money WTI options expiring in March was 20.2 percent versus 20.1 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 417,526 contracts at 4:39 p.m. It totaled 460,727 contracts yesterday, 8.9 percent lower than the three-month average. Open interest was 1.59 million contracts, the lowest level since Feb. 4.

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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