Oil rose the most in almost six weeks amid speculation that Greek lawmakers will approve austerity measures to prevent a debt default and on forecasts U.S. fuel demand will rise before the Fourth of July holiday.
Crude increased 2.5 percent as the euro strengthened before the Greek vote tomorrow that would prevent the zone’s first sovereign debt default. U.S. motorists’ peak fuel use typically occurs during the holiday. Oil extended gains after the National Hurricane Center said a weather system in Mexico’s Bay of Campeche might become a tropical depression.
“The euro has been strong and there’s a likelihood there’s going to be an austerity measure passed in Greece,” said Phil Flynn, vice president of research at PFG Best in Chicago. “Then we popped on the storm upgrade.”
Crude for August delivery advanced $2.28 to settle at $92.89 a barrel on the New York Mercantile Exchange. Prices settled yesterday at the lowest level since Feb. 18. Futures have gained 19 percent in the past year and fallen 13 percent in the second quarter.
Prices advanced from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles slipped 2.7 million barrels to 360.3 million. August oil gained $2.51, or 2.8 percent, to $93.12 a barrel in electronic trading at 4:31 p.m.
Brent oil for August settlement on the London-based ICE Futures Europe exchange climbed $2.79, or 2.6 percent, to $108.78 a barrel. The European benchmark was at a premium of $15.89 to West Texas Intermediate, the U.S. benchmark grade. The spread reached a record $22.29 a barrel on June 15.
The euro rose 0.6 percent to $1.4367 in New York. It has increased 1.3 percent in the past two days before the Greek vote. A euro advancing against the dollar boosts the appeal of commodities as an alternative investment.
“There’s great hope that this plan for Greek debt will help turn the corner,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “It’s optimism that the Greeks aren’t going to default and the euro is not going to break up.”
Greek Prime Minister George Papandreou’s 78 billion-euro ($111 billion) plan to cut spending and sell assets is set for a vote in parliament tomorrow. German and French lenders are the biggest European holders of Greek debt and their participation in the plan is key to the European Union goal of getting banks to roll over at least 30 billion euros of bonds.
Germany’s biggest banks and insurers will meet with the Finance Ministry in Berlin tomorrow as they seek to reach an agreement on their contribution to a Greek aid package, two people with knowledge of the matter said.
U.S. Fuel Demand
Total products supplied in the U.S., a measure of fuel consumption, rose 1.2 percent to 19 million barrels a day in the seven days to June 17, the Energy Department said last week.
“There’s solid demand coming through for gasoline aided by the fall we’ve seen in the retail price ahead of the holiday,” said Matt Smith, a commodities analyst for Summit Energy Services in Louisville, Kentucky.
Regular gasoline at the pump, averaged nationwide, declined 1.4 cents to $3.551 a gallon yesterday, according to AAA data on its website. The price was 11 percent below its peak of $3.985 on May 4, the highest level since July 24, 2008.
U.S. crude inventories probably fell 1.5 million barrels in the seven days to June 24 as refiners boosted gasoline output before the Fourth of July holiday, according to the median estimate of 12 analysts polled before an Energy Department report tomorrow. Supplies dropped 0.4 percent to 362.3 million last week, the survey showed.
A low-pressure system in the eastern Bay of Campeche has a 90 percent chance of developing into a tropical depression within 48 hours, according to a special bulletin from the U.S. National Hurricane Center in Miami at 4 p.m. New York time.
Petroleos Mexicanos, Mexico’s state-owned oil company and Latin America’s largest crude producer, has wells in the bay. Mexico is the second-largest oil exporter to the U.S. and provided 1.19 million barrels a day in March, the latest month for which U.S. Energy Department figures are available.
Oil prices erased almost half their decline since the International Energy Agency announced June 23 that its members would release 60 million barrels in emergency reserves to make up for Libyan shortfalls and curb high prices. Prices tumbled 4.6 percent in New York following the announcement.
“If I’m bearish at this point, I have to be concerned that we’re seeing very little follow-through to last week’s news,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said on Bloomberg Radio’s “Bloomberg - - The First Word” with Ken Prewitt.
Oil volume in electronic trading on the Nymex was 516,611 contracts as of 2:56 p.m. in New York. Volume totaled 516,490 contracts yesterday, 23 percent below the average of the past three months. Open interest was 1.5 million contracts.