West Texas Intermediate crude advanced to a one-week high on signals that global economic growth will accelerate, bolstering fuel consumption.
Futures increased 0.9 percent as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 83.7 in May, higher than any projection in a Bloomberg survey. A government report yesterday showed Japanese gross domestic product grew 3.5 percent at an annualized pace, the most in a year.
“We’re seeing some moderate exuberance here,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Traders are focusing on the positive news at the moment.”
WTI oil for June delivery rose 86 cents to $96.02 a barrel on the New York Mercantile Exchange, the highest settlement since May 10. Prices dropped 2 cents this week. The volume of all contracts traded was 3.4 percent above the 100-day average at 3:41 p.m.
Brent crude for July settlement increased 86 cents, or 0.8 percent, to end the session at $104.64 a barrel on the London-based ICE Futures Europe exchange. The June contract expired at $103.80 yesterday. Volume for all contracts was 18 percent lower than the 100-day average.
The European benchmark crude was at a premium of $8.35 to WTI futures for the same month, down from $8.64 yesterday. The spread dropped to $7.65 at settlement on May 13, the narrowest since January 2011 and down from a record $25.53 on Nov. 15.
“The spread came in too far, too fast,” said Michael Wittner, the head of oil-market research at Societe Generale SA in New York. “The WTI discount to Brent could easily widen back to $12, give or take a dollar, soon.”
The Michigan survey follows a Bloomberg measure of consumer outlook, which improved in May to its best reading in five months. The Bloomberg consumer economic expectations gauge, released monthly, rose to minus 1 from minus 4 in April.
The index of U.S. leading indicators climbed in April. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.6 percent in April after falling a revised 0.2 percent in March that was steeper than previously reported, the New York-based group said today. The median forecast of economists surveyed by Bloomberg called for a 0.2 percent gain.
“Oil is higher because there’s growing optimism about the U.S. economy,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “U.S. demand is going to be higher as a result of economic growth.”
The Standard & Poor’s 500 Index increased to a record intraday high of 1,667.17. The Dollar Index, which tracks the U.S. currency against those of six major trading partners, climbed to 84.371, the highest level since July 2010.
Federal Reserve Bank of San Francisco President John Williams said yesterday that growth and job-market gains may prompt the central bank to taper its $85 billion of monthly bond buying under quantitative-easing stimulus.
“The statements from the San Francisco Fed president that stimulus may be gutted in the next few months is a great vote of confidence in the economy,” Larry said.
Japanese Prime Minister Shinzo Abe will outline a growth plan in a speech today. Investors are more confident in a Japanese leader than at any time since at least September 2010, according to a worldwide poll of investors, analysts and traders who are Bloomberg subscribers.
“The market is up because of positive economic data,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The improving Japanese economy is probably the main driver at this moment.”
Crude supplies fell 624,000 barrels to 394.9 million last week, an Energy Information Administration report on May 15 showed. In the week ended May 3, inventories were at the highest level since 1931.
“It’s amazing that prices are moving higher, given the level of inventories,” Lynch said.
U.S. fuel demand rose 0.1 percent to an average 18.5 million barrels a day in the four weeks ended May 10, the report from the EIA, the Energy Department’s statistical arm, showed.
“I see Brent heading back to $110 or slightly higher in the near term,” Wittner said. “While product demand isn’t going gangbusters, it is growing.”
President Barack Obama and Turkish Prime Minister Tayyip Erdogan presented a joint front against Syrian dictator Bashar al-Assad during the Turkish leader’s visit to Washington this week. An uprising against Syrian government has killed more than 70,000 people since starting in March 2011, according to United Nations estimates.
“You would have to be pretty brave to go home short any weekend,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “With all of the unrest in the Middle East it’s just too dangerous.”
Implied volatility for at-the-money WTI options expiring in July was 20.2 percent versus 21.8 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 521,745 contracts as of 3:40 p.m. It totaled 722,742 contracts in the previous session, 24 percent above the three-month average. Open interest was 1.75 million contracts.