July 17 (Bloomberg) -- Oil traded near its highest level in seven weeks in New York on estimates that U.S. supplies declined last week, concern that tensions with Iran will worsen and signs that the Federal Reserve may boost stimulus measures.
U.S. crude stockpiles probably fell 750,000 barrels last week, a fourth weekly drop that further erodes the biggest glut since 1990, according to a Bloomberg News survey before an Energy Department report tomorrow. Fed Chairman Ben S. Bernanke will deliver his semi-annual report on the economy before Congress today. The U.S. will use “all elements” of American power to prevent Iran from obtaining nuclear weapons, Secretary of State Hillary Clinton said yesterday in Jerusalem.
“Iran and stimulus hopes are keeping prices supported,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, who estimates Brent prices should fall to $100 a barrel, based on fundamentals. “I’m wondering how long oil can withstand the combined headwinds of weak economic growth, continued oversupply and a stronger dollar. Oil is still going up, and this can’t last.”
Crude for August delivery on the New York Mercantile Exchange rose as much as 49 cents, or 0.6 percent, to $88.92 a barrel and was at $88.85 at 1:43 p.m. London time. The contract gained 1.5 percent to $88.43 yesterday, the highest close since May 29. Prices have declined 10 percent this year.
Brent oil for September settlement on the London-based ICE Futures Europe exchange gained $1.13, or 1.1 percent, to $104.50 a barrel. The European benchmark front-month contract was at a $15.27 premium to New York-traded West Texas Intermediate grade, compared with $15.12 yesterday.
A contraction in June retail sales reported by the Commerce Department yesterday fanned speculation that the Fed will renew the program of asset purchases known as quantitative easing intended to cap borrowing costs and foster growth.
Refineries in the U.S., the world’s largest crude consumer, probably boosted production to 93.1 percent of capacity last week, according to the median estimate of six analysts surveyed by Bloomberg. That would be a five-year high and an increase of 0.4 percentage point from a week earlier.
Gasoline inventories may have increased 1.1 million barrels, the survey showed. Stockpiles of distillates, a category that includes heating oil and diesel, are expected to have gained 1 million barrels.
The American Petroleum Institute will release separate supply data in Washington today. The industry group collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Oil in New York may be advancing too quickly for further gains to be sustainable, according to data compiled by Bloomberg. Crude’s 30-day stochastic oscillators have climbed to almost 70, a level that would indicate prices are overbought. Futures also formed a so-called “death cross” yesterday when the 100-day moving average fell below the 200-day mean, a signal for investors to sell contracts.
Clinton departed Israel for Washington today after a nine-country, 12-day trip. She met with Israeli leaders on issues including Iran, upheaval in the Arab world, the stalled Israeli-Palestinian peace process and the political transition in Egypt, where she spent a day and a half.
“We all prefer a diplomatic resolution, and Iran’s leaders still have the opportunity to make the right decision,” Clinton told reporters. “The choice is ultimately Iran’s to make. Our own choice is clear: We will use all elements of American power to prevent Iran from obtaining a nuclear weapon.”
Iran has threatened to close the Strait of Hormuz, a transit route for about a fifth of the global oil shipments, in response to sanctions on its nuclear program. The Persian Gulf nation, a member of the Organization of Petroleum Exporting Countries, says the program is for civilian use.
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