Oil Little Changed on U.S. Economy, Crude Supply

Oil was little changed as U.S. new-home construction rose and crude supplies climbed to the most for this time of year since government records began in 1982.

Futures gained 3 cents as housing starts surged in September to the highest level in four years. U.S. oil demand increased the most in two months last week, an Energy Department report showed. Oil fell in intraday trading as the report also said inventories jumped with output.

“The U.S. economy is modestly growing and the numbers coming out indicate that,” said Marshall Berol, co-portfolio manager of the Encompass Fund in San Francisco, which has about $300 million in assets. “There is good supply out there, but there is also decent demand and it’s holding futures prices in a pretty narrow range.”

Crude oil for November delivery rose for a second day to settle at $92.12 a barrel on the New York Mercantile Exchange. Futures have gained 6.7 percent in the past year.

Prices changed less than 25 cents for a fourth consecutive day, the longest streak of moves that small since 2003. Implied volatility for at-the-money options expiring in December, a measure of expected price swings in futures and a gauge of options prices, was 29.4 percent at 3:20 p.m. in New York, the lowest level in two months.

Brent for December settlement fell 78 cents, or 0.7 percent, to end the session at $113.22 a barrel on the London-based ICE Futures Europe. November futures expired yesterday.

Housing Starts

U.S. housing starts jumped 15 percent last month to an 872,000 annual rate, the most since July 2008, the Commerce Department said. Starts exceeded all forecasts in a Bloomberg survey of economists that ranged from 735,000 to 800,000. Building permits, a proxy for future construction, jumped to the most since July 2008.

Total petroleum demand gained 4.3 percent, the biggest single-week gain in two months, to 19.5 million barrels a day, the Energy Department said in the weekly report. Consumption of gasoline increased 1.7 percent to 8.73 million barrels a day.

Oil also rose as the euro strengthened to a one-month high against the dollar after Spain kept its investment-grade credit rating from Moody’s Investors Service, spurring a rally in Spanish and Italian bonds.

“The housing number is supportive,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The dollar-to-oil connection has been strong.”

The 17-nation European currency appreciated as much as 0.7 percent to $1.314, the highest level since Sept. 17. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.

U.S. Inventories

Oil fell as much as 0.6 percent in intraday trading after the Energy Department report showed U.S. stockpiles grew 2.86 million barrels in the seven days ended Oct. 12 to 369.2 million, more than the 1.5 million-barrel median estimate by analysts polled by Bloomberg.

“There is a lot of crude out there, and it’s pushing prices lower,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “Supply is not tight and prices are on the upper end of the range.”

U.S. production increased for a sixth week to 6.61 million barrels a day, the department said. That’s the highest level since May 1995. Oil imports grew for a third week, up 126,000 barrels a day to 8.35 million.

‘Major Headwinds’

“Oil should be a lot lower based on these figures today,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “Oil is stuck in this range of $91 to $93. It’s having major headwinds anywhere between $93 to $100.”

The report also showed gasoline inventories climbed 1.72 million barrels to 197.1 million last week. They were expected to increase 500,000 barrels.

Gasoline futures for November delivery slumped 6.36 cents, or 2.2 percent, to $2.7817 a gallon on the Nymex, the lowest settlement since July 11.

Electronic trading volume on the Nymex was 500,679 contracts as of 4:02 p.m. Volume totaled 531,339 contracts yesterday, 0.6 percent above the three-month average. Open interest was 1.58 million.

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