West Texas Intermediate crude rose from a two-week low as the fewest U.S. workers in more than five years applied for unemployment benefits over the past month, bolstering optimism that fuel demand will accelerate.
Prices gained for the first time in four days as claims in the month ended Aug. 17 declined to 330,500 a week on average, the least since November 2007, the Labor Department reported. The index of U.S. leading indicators rose in July by the most in three months. Chinese manufacturing resumed expansion and output at European factories improved. WTI’s discount to Brent narrowed more than $1.
“You had positive economic data, which should imply greater demand,” said Tom Finlon, the Jupiter, Florida-based director of Energy Analytics Group LLC. “The market should drift higher.”
WTI for October delivery rose $1.18, or 1.1 percent, to settle at $105.03 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 25 percent below the 100-day average at 3:21 p.m. The contract fell to $103.85 yesterday, the lowest close since Aug. 8.
Brent for October settlement gained 9 cents to $109.90 a barrel on the London-based ICE Futures Europe exchange. Volume was 28 percent below 100-day average. The European benchmark’s premium to WTI shrank to $4.87 from $5.96 yesterday, the widest level since June 26.
Compared with a week earlier, jobless claims rose by 13,000 to 336,000, the Labor Department said. That’s in line with the median forecast of 48 economists surveyed by Bloomberg.
The Conference Board’s gauge of the economic outlook for the next three to six months increased 0.6 percent after no change the prior month.
A preliminary purchasing managers index for China by HSBC Holdings Plc and Markit Economics rose to 50.1 from 47.7, exceeding all 16 estimates in a Bloomberg News survey. A reading above 50 indicates expansion.
A measure of German manufacturing compiled by Markit climbed to 52 in August from 50.7 in July. The median economist estimate had called for a reading of 51.1, according to a Bloomberg survey.
“The jobless claims are decent and Chinese manufacturing is pretty strong,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The economic numbers increased demand expectations.”
Total fuel demand in the U.S. rose 1.3 percent last week to 19.3 million barrels a day, the Energy Information Administration, the statistical arm of the Energy Department, said yesterday.
Crude inventories dropped for a third week to 359.1 million barrels, the lowest level since Aug. 31, 2012, as refineries boosted their utilization rate to above 90 percent, the EIA report showed.
“Fundamentally, the market should trade higher,” Finlon said.
Brent was little changed as Libya said it will resume oil exports from Brega, one of four ports where it declared force majeure this week, as protests that shut the facilities since the end of July eased.
Brega may add some 90,000 barrels a day to Libyan shipments that are running at 500,000 barrels a day, shipped through the Zawiya terminal, in Western Libya, and the offshore loading platforms of Mellitah, Al Jurf and Bouri, the National Oil Corp. said. Es Sider, the nation’s largest terminal, Ras Lanuf and Zueitina remain shut.
Libyan tribesmen stepped up efforts to persuade oil-port guards to end protests that curtailed the North African nation’s crude exports, a spokesman for the security force said.
The country produced 800,000 barrels a day of crude last month, half the rate pumped a year earlier, according to a Bloomberg survey of output from the 12-member Organization of Petroleum Exporting Countries. Libya holds Africa’s largest oil reserves. Nigerian output fell 5.4 percent last month to 1.92 million.
“Oil is a world market,” said John Felmy, chief economist at the industry-funded American Petroleum Institute in Washington. “We’re seeing problems with production in the Middle East.”
WTI dropped earlier as the Federal Reserve signaled a likely reduction in economic stimulus this year. The minutes of the July Fed meeting, released yesterday, showed policy makers were “broadly comfortable” with curbing the $85 billion in monthly bond buying later this year if the economy improves.
Implied volatility for at-the-money WTI options expiring in October was 21.3 percent, down from 22.7 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 423,244 contracts as of 3:22 p.m. It totaled 572,775 contracts yesterday, 12 percent below the three-month average. Open interest was 1.82 million contracts.