West Texas Intermediate crude rose to a three-week high as U.S. retail sales increased the most in three months in May and equities rallied.
Futures gained 0.8 percent after the Commerce Department reported sales advanced 0.6 percent and the Labor Department said weekly jobless claims declined. Prices extended the rally in the last 15 minutes of floor trading, along with the Standard & Poor’s 500 Index. August Brent futures jumped 1.3 percent as the July contract expired.
“We are seeing signs that the economy is improving and energy demand is going to be higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We had some end-of-the-day buying as the equity markets started to move higher. The longs are basically back in charge.”
WTI for July delivery advanced 81 cents to $96.69 a barrel on the New York Mercantile Exchange, the highest settlement since May 20. The volume of all futures traded was 5.4 percent below the 100-day average for the time of day at 4:09 p.m. Prices have jumped 5.3 percent this year.
May retail sales, growing at a faster pace than the 0.1 percent increase in April, showed job gains and lower borrowing costs are encouraging consumers to spend. The median of 83 estimates by economists surveyed by Bloomberg called for a 0.4 percent rise.
U.S. gasoline demand averaged 8.8 million barrels a day in the four weeks ended June 7, up 0.9 percent from the prior week, the Energy Information Administration reported yesterday.
“The retail sales number is pretty solid and should be good for oil,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The story of modest economic growth continues, and we’ll see continued oil demand growth.”
Jobless claims slid by 12,000 to 334,000 last week, fewer than the 346,000 median forecast by 51 economists surveyed by Bloomberg. The four-week moving average, a less-volatile measure than the weekly figures, declined to 345,250 last week, the lowest level since Sept. 21. It was 352,500 the prior week.
“The four-week average fell below 350,000, and it’s a pretty good sign,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “We are seeing a pickup in retail consumption, and it’s good. In the short run, it helps.”
The U.S., the world’s biggest oil-consuming country, accounted for about a fifth of global demand in 2012, according to BP Plc’s Statistical Review of World Energy, released yesterday.
The S&P 500 index rallied 1.5 percent. The Dollar Index, which measures the greenback against six other major currencies including the euro, fell as much as 0.6 percent. A weaker dollar increases oil’s appeal as an investment alternative.
“We continue to see a willingness on the part of investors to buy on the back of the U.S. economic growth story,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in an e-mail.
Brent oil traded on the London-based ICE Futures Europe exchange rose amid concern that Middle Eastern exports may be disrupted by political unrest.
Presidential elections will be held tomorrow in Iran, holder of the world’s fourth-largest oil reserves. Protesters returned to Istanbul’s Taksim Square as the biggest rallies in more than 10 years spread nationwide after May 31. Libya’s output has plunged by at least 600,000 barrels a day from more than 1.6 million in the middle of last year, state-run NOC said in a statement on June 11.
The Middle East is “definitely an important factor here,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. People are worried “how quickly supplies can become tight again.”
Brent for July settlement, which expired today, climbed 76 cents, or 0.7 percent, to $104.25 a barrel on ICE. The more actively traded August futures increased $1.39, or 1.3 percent, to $104.95. Volume was 21 percent below the 100-day average for the time of day.
August Brent increased more than the July futures as commodity index funds rolled over to the next month’s contract before the expiration, said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
Brent’s premium to WTI was little changed at $7.56 a barrel from yesterday’s settlement of $7.61.
Implied volatility for at-the-money WTI options expiring in August was 19.7 percent, compared with 20.2 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 500,762 contracts at 4:11 p.m. It totaled 557,125 contracts yesterday, 7.8 percent lower than the three-month average. Open interest was a record 1.82 million contracts.