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Oil Rises to One-Week High on U.S. Economic Outlook

Oil rose to a one-week high on signs the U.S. economy is recovering, easing concern that demand from the world’s biggest crude-consuming country will decline.

Crude gained 1.1 percent after Commerce Department data showed orders for durable goods climbed more than forecast in May. More Americans than estimated signed contracts to purchase previously owned homes last month, the National Association of Realtors reported. Oil retreated from the day’s highs after the Energy Department said U.S. gasoline supplies jumped last week.

“The durable goods number is giving the market the sense that things aren’t too bad, at least in the U.S.,” said Phil Flynn, a senior market analyst at the Price Futures Group in Chicago. “The economic data recently seems to be raising expectations for more oil demand.”

Crude oil for August delivery advanced 85 cents to $80.21 a barrel on the New York Mercantile Exchange, the highest settlement in a week. Prices traded below $80 after the release of the inventory data at 10:30 a.m. Oil has fallen 22 percent this quarter, heading for the biggest drop since the final three months of 2008.

Brent oil for August settlement increased 48 cents, or 0.5 percent, to end the session at $93.50 a barrel on the London-based ICE Futures Europe exchange.

Durable goods bookings rose 1.1 percent, the first increase in three months, the Commerce Department reported. The median forecast of 76 economists surveyed by Bloomberg called for a 0.5 percent gain. Excluding the volatile transportation equipment, orders for goods meant to last at least three years advanced 0.4 percent.

U.S. Economy

The index of pending home resales climbed 5.9 percent to 101.1, matching a two-year high reached in March, after a 5.5 percent decline in April. The median forecast of 39 economists surveyed by Bloomberg News called for a 1.5 percent gain in May.

Oil also followed gains in U.S. equities. The Standard & Poor’s 500 Index rose 0.9 percent.

“Everything popped at the same time,” said Rich Ilczyszyn, chief market strategist and founder of in Chicago. “Oil is down more than 20 percent and, in the short term, we are all looking for some kind of reasons to get in the market.”

Brent oil gained for a fourth day as Norwegian fields closed in a labor dispute.

Statoil ASA, the country’s biggest energy company, estimates the industrial action is curbing national crude production by as much as 250,000 barrels a day while Norway’s Oil Industry Association said today that a North Sea strike has cut oil output an estimated 240,000 barrels a day and gas output by 11.9 million standard cubic meters a day.

Oil from the Oseberg field, along with Forties, Brent and Ekofisk, is used to determine Dated Brent, a benchmark price for more than half the world’s petroleum supplies.

U.S. Supply

New York futures pared gains after the Energy Department said gasoline stockpiles increased more than twice as much as expected last week.

Gasoline inventories climbed 2.08 million barrels to 204.8 million as refineries raised their production levels to a five-year high, Energy Department data showed. Stockpiles were forecast to gain 1 million barrels, according to a Bloomberg survey.

Gasoline futures for July delivery fell 2.47 cents, or 0.9 percent, to $2.6204 a gallon on the Nymex.

“There is too much inventory and oil will be going lower,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “I am going to continue to sell any rally in crude oil. At the end of the day oil may be back under $80 again.”

Refinery Utilization

Refineries raised their utilization rate to 92.6 percent, up from the previous week’s 91.9 percent and the highest level since July 2007, the report showed.

“The markets are very sensitive to any changes from what was expected,” said Marshall Berol, co-portfolio manager of the Encompass Fund in San Francisco, which has about $300 million in assets.

Demand for gasoline increased 1.8 percent to 8.85 million barrels a day. Consumption of the fuel is still 4.5 percent lower than a year earlier, Energy Department data showed.

Crude inventories declined 133,000 barrels to 387.2 million, falling from the highest level in 22 years. Stockpiles were forecast to decrease 1.3 million barrels, according to the Bloomberg survey.

Electronic trading volume on the Nymex was 432,454 contracts as of 4:08 p.m. in New York. Volume totaled 454,088 contracts yesterday, 18 percent below the three-month average. Open interest was 1.43 million.

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