Oil Advances on U.S. Economic Outlook After Weekly Gain

Oil rose in New York, adding to two weeks of gains, before a report that may show signs of economic improvement in the U.S., the world’s biggest crude consumer.

Futures climbed as much as 0.9 percent, extending a 1.6 percent advance last week. Retail sales probably increased 0.3 percent in July for the first rise in four months, according to a Bloomberg News survey of economists before Commerce Department data tomorrow. Prices gained even as European and U.S. stock futures declined and most Asian shares fell on slowing growth in Japan. Israel will hold home defense drills this week amid reports by the Haaretz daily that the country is considering striking Iran over its nuclear program.

“The U.S. is clearly in recovery,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “The move above the high that we saw in mid-July of almost $93 has pushed us into a higher trading range and we expect to test $98 reasonably soon, over the next week, or two weeks.”

Crude for September delivery rose as much as 87 cents to $93.74 a barrel in electronic trading on the New York Mercantile Exchange. It was at $93.20 at 2:57 p.m. Singapore time. The contract fell 49 cents to $92.87 on Aug. 10. Prices are 5.9 percent lower since the start of the year.

Brent oil for September settlement on the London-based ICE Futures Europe exchange climbed as much as $1.33, or 1.2 percent, to $114.28 a barrel. The more-actively traded October contract was up 35 cents at $111.46 a barrel. The European benchmark crude was at $20.45 above New York-traded West Texas Intermediate grade. The premium was $20.08 on Aug. 10, the highest since April.

The spread between the two varieties has widened amid maintenance shutdowns at North Sea fields that are the physical basis of the Brent futures contract. BP Plc on Aug. 10 said it will close its Ninian Pipeline System in the area for 10 days.

Bullish Bets

An increase in U.S. retail sales could ease concern the economic expansion was faltering. Other reports due this week may show the country’s factory production climbed last month.

Money managers boosted net-long positions on crude, or wagers that prices will rise, by 20 percent in the seven days ended Aug. 7, according to the U.S. Commodity Futures Trading Commission’s weekly report Aug. 10. That’s the biggest gain since March 1 last year, when Libyan output dropped as civil war in the North African nation intensified.

Oil in New York has technical resistance along the upper Bollinger Band on the daily chart, around $94.84 a barrel today, according to data compiled by Bloomberg. Futures halted their advance near this indicator the past four days. Sell orders tend to be clustered close to chart-resistance levels.

Strait of Hormuz

The U.S. Navy yesterday said one of its guided-missile destroyers collided with an oil tanker near the Strait of Hormuz, a transit route for about a fifth of global crude shipments. The USS Porter hit the Panamanian-flagged M/V Otowasan at about 1 a.m. local time, said Bahrain-based U.S. 5th Fleet spokesman Lieutenant Greg Raelson. The incident was not combat-related and damage to the ship was being evaluated, he said.

“It does raise the main issue in this area,” Dominick Chirichella, a senior partner at the Energy Management Institute in New York, said in a note to clients. “A large number of military vessels are patrolling the area which as we have seen increases the possibility of accidents and thus the potential to slow the flow of traffic through this area.”

U.S. ships are patrolling the Strait as Iran has threatened to block the waterway in retaliation for sanction’s targeting its nuclear program. Israeli leaders are leaning toward a strike on the country before U.S. elections in November despite opposition to such a move by the security establishment, the Haaretz daily reported Aug. 10.

Iraqi Production

Iraq’s daily crude production climbed to 3.2 million barrels and will reach 3.4 million barrels by year’s end as planned, according to Deputy Prime Minister for Energy Affairs Hussain al-Shahristani. That would be the fastest rate in more than 20 years. The country’s output has surpassed that of Iran and Kuwait, al-Shahristani said yesterday in Baghdad.

The average price of regular gasoline at U.S. filling stations rose 18.38 cents in the past two weeks, the most this year, to $3.6896 a gallon, according to Lundberg Survey Inc. The Camarillo, California-based company surveyed about 2,500 stations for the period to Aug. 10.

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