Crude Rises for Second Day as Manufacturing Expands

West Texas Intermediate crude rose for a second day as manufacturing in the New York region expanded in July at the fastest pace in five months. Brent oil settled at a three-month high.

Prices climbed 0.4 percent as the Federal Reserve Bank of New York’s general economic index advanced to 9.5, the highest level since February. Oil also rose as Islamists in Egypt, which controls the Suez Canal, called for mass protests to demand the reinstatement of ousted President Mohamed Mursi. Prices fell earlier after U.S. retail sales rose less than projected.

“Crude’s been adjusting to the economic data,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The manufacturing number is more forward-looking. It reinforces the story of modest growth with future upside.”

WTI for August delivery gained 37 cents to settle at $106.32 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 15 percent below the 100-day average for the time of day. The contract climbed $1.04 on July 12, capping a 13 percent rally over three weeks.

Brent for August rose 28 cents to $109.09 a barrel on the London-based ICE Futures Europe exchange, the highest settlement since April 2. Volume was 7.9 percent below 100-day average. Brent’s premium over WTI narrowed to $2.75 from July 12’s $2.86. The spread was $1.99 on July 10, the smallest based on closing prices since November 2010.

July Manufacturing

The July manufacturing index was higher than last month’s 7.8. Readings greater than zero signal expansion in New York, northern New Jersey and southern Connecticut. The median projection in a Bloomberg survey of 50 economists called for a reading of 5.

The U.S., the world’s biggest oil-consuming country, accounted for a fifth of the world’s demand in 2012, according to BP Plc’s Statistical Review of World Energy.

Demonstrations in Egypt, which may target military sites, are building on efforts by the Muslim Brotherhood to squeeze the army after it pushed Mursi from power on July 3 following a wave of protests against his rule. A combined 2.24 million barrels a day of oil were shipped from the Red Sea to Europe and North America in 2011 via the Suez Canal and the Suez-Mediterranean pipeline, Energy Department data show.

“Things are still messy in Egypt and that’s supportive for oil,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC.

Goldman Sachs

Goldman Sachs Group Inc. said price risks for Brent crude in the second half of the year have changed “to the upside” amid production losses in some Organization of Petroleum Exporting Countries nations and political threats to supply.

Reductions in output from Libya, Iraq and Nigeria have the potential to limit availability, the bank said today in an e-mailed report.

Hedge funds increased bullish bets on WTI to the highest level since May 2011, the U.S. Commodity Futures Trading Commission said July 12. Money managers boosted their net-long positions on WTI, or wagers that prices will rise, by 6.9 percent to 281,918 futures and options combined in the seven days ended July 9, the CFTC said in its Commitments of Traders report.

Bullish bets on Brent outnumbered short positions by 176,988 lots, the ICE Futures Europe said.

Retail Sales

Prices declined as much as 1.2 percent in intraday trading on reports that U.S. retail sales increased less than expected and China’s economic growth slowed.

Sales grew 0.4 percent last month, the Commerce Department reported. That’s slower than the 0.8 percent gain forecast by economists surveyed by Bloomberg. Consumer spending is the biggest part of the economy.

China’s gross domestic product increased 7.5 percent from April to June, the slowest in three quarters, as growth in factory output and fixed-asset investment weakened, the National Bureau of Statistics said. It extended the longest streak of sub-8 percent annual expansion in at least two decades.

Oil consumption in China, the second biggest oil-consuming country after the U.S., surged 11 percent from a year ago to about 10 million barrels a day last month, the statistics data showed.

Implied volatility for at-the-money WTI options expiring in September was 21.3 percent, compared with 21.2 percent on July 12, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 435,914 contracts as of 2:32 p.m. It totaled 647,156 contracts on July, 3.3 percent below the three-month average. Open interest was a record 1.87 million contracts.

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