Crude Rises to a One-Week High on Japanese StimulusMark Shenk
West Texas Intermediate crude rose to a one-week high as the Group of 20 nations approved of Japan’s stimulus program, bolstering speculation that fuel demand will climb in the third-biggest oil-consuming nation.
Futures advanced 0.9 percent after G-20 finance chiefs backed the Bank of Japan’s plan to buy 7 trillion yen ($70 billion) of bonds a month. The market retreated earlier as a report from the National Association of Realtors showed purchases of previously owned U.S. houses fell in March. The United Arab Emirates’ energy minister said today that he considers global oil markets to be “well-balanced.”
“The Japanese stimulus effort is adding a positive spin to the market,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “You are seeing a risk-on move in the all of the markets. Quantitative easing programs elsewhere have already given the oil market a boost, and this will do the same.”
WTI oil for May delivery climbed 75 cents to $88.76 a barrel on the New York Mercantile Exchange, the highest settlement since April 12. Prices slipped 3.6 percent last week. May futures expired today. The more-active June contract rose 92 cents to settle at $89.19. The volume of all futures traded was 16 percent below the 100-day average for the time of day at 3:03 p.m.
Brent crude for June settlement rose 74 cents, or 0.7 percent, to end the session at $100.39 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded today was 8.9 percent lower than the 100-day average.
The front-month European benchmark grade contract traded at a premium of $11.20 to June WTI.
At a meeting in Washington late on April 19, G-20 finance chiefs and central bankers praised the measures taken by the BOJ this month aimed at increasing inflation to 2 percent within two years. They signaled Japan’s focus on supporting domestic demand was strong enough to allow them to ignore the side effects on their own economies of a sliding yen.
Oil in New York has surged since touching $32.40 on Dec. 19, 2008, as the U.S. Federal Reserve embarked on three rounds of bond purchases, called quantitative easing, to stimulate the nation’s economy.
The Standard & Poor’s 500 Index gained 0.6 percent while the Dow Jones Industrial Average increased 0.2 percent. The S&P 500 fell 2.1 percent last week, its biggest drop since November.
“Oil is primarily up because of the strong rebound of the S&P 500,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “It makes sense that we would be gaining anyway after the big drop last week.”
Sales of previously owned U.S. houses, tabulated when a contract closes, fell 0.6 percent to a 4.92 million annual rate last month. They were projected to increase to a 5 million rate, according to the median forecast of 75 economists surveyed by Bloomberg. The February pace of sales was revised to 4.95 million from a previously reported 4.98 million, the Washington-based industry group said.
“The home sales numbers were obviously negative for the market,” said John Kilduff, a partner at Again Capital LLC, a New York energy hedge fund. “The worries about demand that sent us lower last week aren’t going away.”
The Organization of Petroleum Exporting Countries, scheduled to convene on May 31, is ensuring that supplies are sufficient, U.A.E. Energy Minister Suhail Mohammed Al Mazrouei told reporters today in Abu Dhabi.
“The market is well-balanced, and there is no oversupply in the market,” Al Mazrouei said. “There is enough supply in the market.”
Crude will trade at $100 a barrel in the third quarter after a second-quarter correction driven by oversupply and a fall in stock markets, Saad Al-Kuwari, the chief executive officer of Qatar International Petroleum Marketing Co., or Tasweeq, said today in Abu Dhabi.
Money managers reduced net-long positions, or wagers that West Texas Intermediate will increase, by 6.8 percent in the week ended April 16, according to the U.S. Commodity Futures Trading Commission.
Net-long positions in WTI held by money managers, including hedge funds, commodity pools and commodity-trading advisers, declined by 13,298 futures and options combined to 183,032, the least since the week ended March 19, the CFTC report showed. It was the biggest drop since the period ended Feb. 26.
Implied volatility for at-the-money WTI options expiring in June was 23.5 percent, down from 24.8 percent April 19.
Electronic trading volume on the Nymex was 390,726 contracts as of 3:03 p.m. It totaled 527,509 contracts April 19, 10 percent lower than the three-month average. Open interest was 1.75 million contracts.