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WTI Crude Surges Most in Seven Weeks on Jobless Claims

West Texas Intermediate crude surged the most in seven weeks after fewer Americans than forecast filed claims for unemployment benefits, bolstering optimism that U.S. economic growth will accelerate.

Futures advanced 1.7 percent after the Labor Department said jobless claims fell by 21,000 to 323,000 last week, the fewest since Sept. 28. The median forecast of 47 economists surveyed by Bloomberg called for 335,000. U.S. fuel demand averaged over four weeks reached a five-year high of 20.3 million barrels a day last week, Energy Information Administration data showed yesterday.

“Any improvement in the jobs picture is good for demand,” said Michael Wittner, head of oil market research at Societe Generale SA in New York. “Yesterday’s report showed that product consumption is rocking and rolling. This will improve refinery margins, which will increase crude demand.”

WTI for January delivery climbed $1.59 to $95.44 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 31. It was the biggest gain since Oct. 2. The volume of all futures traded was 9.4 percent below the 100-day average.

Brent for January settlement rose $2.02, or 1.9 percent, to close at $110.08 a barrel on the London-based ICE Futures Europe exchange. The European benchmark traded at a $14.64 premium to WTI versus $14.21 yesterday.

The four-week average of jobless claims, a less-volatile measure, decreased to 338,500 last week from 345,250 the prior week, the Labor Department said in Washington.

‘Broader Market’

“The U.S. jobs number was a little bullish for the oil market,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The improving jobs picture is a positive sign for the broader economy as a whole.”

The Standard & Poor’s 500 Index rose 0.8 percent and the Dow Jones Industrial Average gained 0.6 percent. The S&P 500 reached a record Nov. 15.

Four-week average total fuel consumption increased 2.8 percent last week, a fourth consecutive gain, according to the EIA. Demand for distillate fuels, a category that includes diesel and heating oil, jumped 6.4 percent and gasoline usage went up 0.4 percent. The government measures shipments from refineries, pipelines and terminals to calculate demand.

Gasoline for December delivery gained 8.08 cents, or 3 percent, to settle at $2.7438 a gallon in New York. It was the highest close since Sept. 13. December ultra-low-sulfur diesel rose 5.22 cents, or 1.8 percent, to $3.0067. The crack spread, the profit to process three barrels of oil into two of gasoline and one of heating oil, rose $1.36 to $22.94 a barrel based on January contracts.

Fibonacci Retracement

Today’s advance pushed futures out of a key technical trading range, said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. Crude traded in the 50 percent to 61.8 percent Fibonacci retracement of the increase from $77.28 in June 2012 to the intraday high of $112.24 on Aug. 28 from Nov. 11 through yesterday. Investors typically buy contracts when prices exceed technical resistance.

“We’ve had a precipitous drop since late August when the Syrian tension began to ease,” Schork said. “The bears can’t even gather interest in a further move lower.”

WTI has tumbled 15 percent since the August peak as tension between Western powers and both Syria and Iran have been reduced and U.S. crude inventories have surged.

Iran’s Foreign Minister Mohammad Javad Zarif met the European Union foreign policy chief, Catherine Ashton, for about two hours in Geneva, according to an EU statement. Ashton is negotiating on behalf of the five permanent members of the United Nations Security Council plus Germany.

Geneva Talks

Envoys are trying to strike a first-step accord that would give negotiators a six-month window in which to win a broader agreement over Iranian nuclear work. Iran denies allegations that its atomic research work is a cover to build weapons.

“If and when there’s an interim agreement you could see oil come off by $5 rather quickly, in a couple of days even,” Wittner said. “Once the news is absorbed, prices may rebound because there will be no change to the oil fundamentals. Any return of barrels will have to wait for a comprehensive agreement, which will take several months.”

Iran’s oil output has decreased 16 percent since the U.S. and the European Union tightened sanctions in July 2012 to curb its nuclear program, data compiled by Bloomberg show. Iran, OPEC’s second-biggest producer in June 2012, is now in sixth place.

Draghi Comments

Oil also rose after comments by European Central Bank President Mario Draghi sent the euro higher against the dollar. Draghi said in Berlin that policy makers considered the risks of keeping interest rates low for an extended period. The euro rose as much as 0.3 percent against the U.S. currency, a move that usually strengthens commodities.

Implied volatility for at-the-money WTI options expiring in January was 16.5 percent, down from 17.3 percent yesterday, according to data compiled by Bloomberg.

Electronic trading volume on the Nymex was 439,834 contracts as of 2:53 p.m. It totaled 441,925 contracts yesterday, 24 percent below the three-month average. Open interest was 1.61 million contracts, the least since Feb. 6.

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