Oil rose in New York after home prices in 20 U.S. cities dropped at a slower pace in February, bolstering optimism that economic expansion will accelerate in the world’s biggest crude-consuming country.
Futures climbed 0.4 percent after the S&P/Case-Shiller index of property values fell 3.5 percent from a year earlier, the smallest 12-month drop since February 2011. Crude also climbed as equities rose on better-than-estimated earnings. An Energy Department report tomorrow may show that supplies rose 2.8 million barrels, according to a Bloomberg survey.
“We are following all the economic headlines for signs of demand,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There was a bounce in the stock market, which seemed to give oil a boost.”
Crude oil for June delivery advanced 44 cents to settle at $103.55 a barrel on the New York Mercantile Exchange. Prices are up 4.8 percent this year.
Prices rose after the American Petroleum Institute said U.S. oil supplies fell 985,000 barrels to 368.4 million last week. Oil gained 61 cents, or 0.6 percent, to $103.72 a barrel in electronic trading at 4:32 p.m.
Brent oil for June settlement declined 55 cents, or 0.5 percent, to end the session at $118.16 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $14.61 to New York futures, down from $15.60 yesterday. The spread between the contracts surged to a record $27.88 on Oct. 14.
The S&P/Case-Shiller index climbed from the prior month on a seasonally adjusted basis. A separate report showed that sales of new U.S. homes were stronger than projected in March.
Purchases ran at a 328,000 annual rate, a decline of 7.1 percent from a revised 353,000 pace in February that was faster than first projected, figures from the Commerce Department showed today in Washington. Economists forecast a March rate of 319,000, according to the median estimate in a Bloomberg survey.
“The housing numbers aren’t great but they have improved,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.
The Standard & Poor’s 500 Index rose 0.4 percent. The euro strengthened 0.2 percent versus the dollar. A stronger common currency increases the appeal of raw materials as an investment.
“Stocks and the euro are higher,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The market wasn’t able to gain momentum above $104. We’ll have to see if the latest batch of U.S. economic numbers is enough to move us higher.”
U.S. crude stockpiles are forecast to climb to the highest level since May, according to the median of 11 analyst responses in a Bloomberg survey. Gasoline supplies probably dropped 1.5 million barrels last week, the survey showed. Distillate-fuel inventories, a category that includes heating oil and diesel, gained an estimated 500,000 barrels.
“The DOE report tomorrow is expected to show another supply increase, which will be bearish,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
The government requires that reports be filed with the Energy Department for its weekly survey. The API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines.
The Federal Reserve began a two-day meeting today on monetary policy. Policy makers tomorrow will probably repeat their plan to keep the benchmark interest rate low at least through late 2014, economists say.
“You’re seeing positions taken before tomorrow’s Fed announcement, even though members have indicated that nothing will change,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “Tomorrow could be very volatile because of the releases.”
There is consensus that long-term crude prices will average about $90 to $95 a barrel, Daniel Jaeggi, Mercuria Energy Trading SA’s head of trading said at the Financial Times Global Commodities Summit in Lausanne, Switzerland, today. Glencore International Plc’s head of oil, Alex Beard, said at the same conference that $95 is a sustainable long-term price.
Electronic crude trading volume of on the Nymex was 337,479 contracts as of 4:32 p.m. Volume totaled 373,287 contracts yesterday, the lowest level since March 26 and 41 percent below the three-month average. Open interest was 1.54 million.