Oil climbed the most in two months as the euro rose against the dollar and tension between Syria and Turkey fanned concern that Middle East output will be disrupted.
Prices jumped $3.57, erasing almost all of yesterday’s $3.75 loss. The euro advanced to a two-week high after European Central Bank President Mario Draghi said the common currency is “irreversible.” Turkey’s parliament authorized the government to order military action in Syria. A mortar bomb fired across the border yesterday killed five Turks.
“The euro is showing some strength and that’s helping to push oil prices higher,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “You’ve got a new front in the tensions in the Middle East plus the weakness of the dollar and that’s all adding up to the strength in crude.”
Crude for November delivery gained 4.1 percent to settle at $91.71 a barrel on the New York Mercantile Exchange. It was the biggest increase since Aug. 3. Futures plunged 4.1 percent yesterday after the Energy Department reported U.S. production climbed to the highest level in more than 15 years while fuel usage decreased. Futures have risen 21 percent in the past year.
Brent oil for November settlement advanced $4.41, or 4.1 percent, to $112.58 a barrel on the London-based ICE Futures Europe exchange.
The euro gained the most in almost three weeks versus the dollar after Draghi said the ECB is ready to start buying government bonds as soon as the necessary conditions are fulfilled. He spoke at a press conference today in Ljubljana, Slovenia, after policy makers left the benchmark rate at a historic low of 0.75 percent.
“The more Draghi speaks, the weaker the dollar gets,” Armstrong said. “We had a strong selloff yesterday and it’s normal we should have a rebound.”
The euro increased as much as 1 percent to $1.3032, the highest level since Sept. 21. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.
“The possibility of the ECB getting something done is making people a little more bullish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The Turkey-Syria tension is a big part of today’s story. Anything like this in that region tends to make traders nervous.”
The killings yesterday in the Turkish town of Akcakale highlight the risk that neighboring countries could be drawn into Syria’s civil war. Turkey has backed the rebels fighting to oust President Bashar al-Assad and allowed them to use bases inside Turkey. Turkish artillery units fired yesterday and today at Syrian military targets.
The fighting also raised concern that the Kirkuk-Ceyhan pipeline will be disrupted. Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, exports oil through the line, which runs through Iraq and southern Turkey near the Syrian border.
“Traders are focusing on the situation in the Middle East,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “There may be an occasional attack on the pipeline but I don’t see that causing a major problem.”
Countries in the Middle East and North Africa were responsible for 36 percent of global oil production and held 52 percent of proved reserves in 2011, according to BP Plc’s Statistical Review of World Energy.
Saudi Arabia is trying to keep oil prices at a “reasonable level” and sees no difficulty in meeting demand, Oil Minister Ali al-Naimi said today at a conference in Ankara, Turkey.
Current prices make it unlikely the Obama administration will release crude from the Strategic Petroleum Reserve, said Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, in an interview with Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance.”
Oil also increased as U.S. stocks rallied after a report showed American jobless claims rose less than economists estimated. The Standard & Poor’s 500 Index gained for a fourth day, up as much as 0.8 percent.
Applications for jobless benefits increased to 367,000 in the week ended Sept. 29, Labor Department figures showed today in Washington. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey.
A Labor Department report tomorrow may show employers took on 115,000 workers in September, more than the prior month, while the jobless rate rose to 8.2 percent from 8.1 percent, according to the median estimate in a Bloomberg survey of economists.
“The market is a little optimistic on the employment numbers tomorrow and equities are higher,” said Carl Larry, president of Oil Outlooks & Opinions LLC in New York. “It’s a correction after yesterday’s free fall.”
Electronic trading volume on the Nymex was 469,061 contracts as of 2:41 p.m. Volume totaled 661,524 contracts yesterday, the most since Sept. 19 and 26 percent above the three-month average. Open interest was 1.57 million.