West Texas Intermediate oil rose, paring the biggest weekly decline since December, after German business confidence climbed to a 10-month high and the Standard & Poor’s 500 Index advanced.
Futures gained 0.3 percent as the Munich-based Ifo institute’s business climate index increased, signaling that Europe’s largest economy is gathering strength. Equities also rallied on the report. Oil tumbled $4.26 a barrel in the previous two days. The drop accelerated yesterday after the Energy Information Administration said U.S. crude supplies rose 4.14 million barrels last week to 376.4 million.
“The market is refocusing on the economy after the bloodbath of the last couple days,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The German investor confidence numbers were better than expected, supporting the market today. The market is going to be batted back and forth on the latest economic headlines.”
Crude oil for April delivery rose 29 cents to settle at $93.13 a barrel on the New York Mercantile Exchange. The contract ended at $92.84 yesterday, the lowest settlement since Dec. 31. Futures dropped 2.8 percent this week, the most since the seven days ended Dec. 7. The volume of all futures traded was 26 percent below the 100-day average at 3:23 p.m.
Brent oil for April settlement climbed 57 cents, or 0.5 percent, to end the session at $114.10 a barrel on the London-based ICE Futures Europe exchange. Prices fell 3 percent this week. The volume was 24 percent lower than the 100-day average.
The European benchmark crude grade settled at a $20.97 premium to WTI. The gap expanded to $23.18 on Feb. 8, the widest level since level Nov. 26.
Ifo’s business climate index, based on a survey of 7,000 executives, climbed to 107.4 from 104.3 in January. Economists predicted an increase to 104.9, according to the median of 38 forecasts in a Bloomberg survey.
The S&P 500 and the Dow Jones Industrial Average both rose 0.7 percent. The S&P 500 rebounded from a two-day, 1.9 percent slump, its worst since Nov. 8.
The selloff in the oil market brings prices in line with underlying fundamentals, Jeffrey Currie, Goldman Sachs Group Inc.’s head of commodities research in New York, said in a report dated yesterday.
Gasoline inventories decreased 2.88 million barrels last week, the EIA said yesterday. They were projected to fall 900,000 barrels in a Bloomberg survey. Distillate stockpiles, including heating oil and diesel, slid 2.28 million barrels, compared with a predicted 1.8 million decline.
Futures in New York may decline after breaching support at the 50-day moving average, according to a technical analysis by Bill Baruch, a senior market strategist at Iitrader.com in Chicago. The April contract may move toward the 200-day moving average around $92.22 a barrel, he said. It settled yesterday below the 50-day mean for the first time since Dec. 18.
Oil prices in New York will probably fall next week, a Bloomberg survey showed. Twenty of 30 analysts and traders, or 67 percent, forecast crude will drop through March 1. Five respondents, or 17 percent, predicted a gain. Five said there would be little change.
If the U.S. Congress doesn’t act before a March 1 deadline, automatic spending cuts known as sequestration will take effect. Federal spending will be reduced by $85 billion in the final seven months of this fiscal year and by $1.2 trillion over the next nine years. By the end of 2013, inaction would lower the gross domestic product by 0.6 percent and cost 750,000 jobs, according to the non-partisan Congressional Budget Office.
“The selling pressure has stopped at least for the moment,” McGillian said. “There’s still a chance that some agreement will be reached to avoid the sequester.”
In Italy, voters head for general elections on Sunday amid concern the emergence of a populist government will derail the nation’s austerity program. Caretaker Prime Minister Mario Monti has failed to make headway in opinion polls, even as former premier Silvio Berlusconi and ex-comic Beppe Grillo gained popularity. Pier Luigi Bersani, the union-backed Democratic Party candidate, leads the field.
“Attention next week will be focused on whether we’re able to avoid sequestration here and whether Berlusconi returns to power in Italy,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Either event could have a major impact on prices.”
Electronic trading volume on the Nymex was 350,491 contracts as of 3:21 p.m. It totaled 588,483 contracts yesterday, 12 percent above the three-month average. Open interest was 1.65 million.