Oil Little Changed as Equities Rally to Record

West Texas Intermediate crude was little changed as equities gained on speculation of central-bank stimulus measures after economic reports from the U.S. and Europe missed forecasts.

Prices rose 9 cents, reversing a 2.2 percent intraday drop, as the Standard & Poor’s 500 Index climbed to a record. Futures tumbled earlier after U.S. industrial production fell by the most in eight months in April, manufacturing in the New York region unexpectedly shrank in May and the euro-area economy contracted more than forecast in the first quarter. Fuel demand slid 3.1 percent last week in a government report today.

“Bad news is good news,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “People look at the bad macroeconomic picture and they think that the odds are greater for the central banks to do something.”

WTI for June delivery settled at $94.30 a barrel on the New York Mercantile Exchange, the first advance in five days. The volume of all contracts traded was 30 percent above the 100-day average for the time of day at 3:04 p.m. Prices have increased 2.7 percent this year.

Brent for June settlement rose $1.08, or 1.1 percent, to $103.68 a barrel on the London-based ICE Futures Europe exchange. The volume of contracts traded was 23 percent higher than the 100-day average.

The front-month European benchmark’s premium to WTI widened 99 cents to $9.38, the widest gap since April 26. It closed at $7.65 on May 13, the narrowest spread since January 2011.

S&P 500

The S&P 500 climbed as much as 0.7 percent to a record 1,661.49, erasing an earlier loss of 0.2 percent. The Dow Jones Industrial Average gained 0.6 percent.

“We are moving with the equities,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “Stocks are pulling oil up.”

The Federal Reserve said on May 1 that it will keep buying bonds at a monthly pace of $85 billion while standing ready to raise or lower purchases as economic conditions evolve.

Output at U.S. factories, mines and utilities decreased 0.5 percent after a revised 0.3 percent gain in March that was weaker than previously reported, the Fed said today.

Manufacturing in New York, northern New Jersey and Connecticut declined for the first time since January, the Federal Reserve Bank of New York reported. The New York Fed’s general economic index decreased to minus 1.4 this month from 3.1 in April. Readings less than zero signal contraction.

The U.S. used 21 percent of world’s oil in 2011, according to BP Plc’s Statistical Review of World Energy.

Fuel Consumption

Fuel consumption slipped by 584,000 barrels last week to 18.5 million barrels a day, the Energy Information Administration reported today. Gasoline demand slid 1.2 percent to 8.34 million barrels a day, the lowest level since March 15. Consumption of distillates, including heating oil and diesel, decreased 2.4 percent.

“The demand data is tepid at best,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “Supplies remain at high levels and the most recent economic numbers are muted.”

Crude Stockpiles

Crude inventories decreased 624,000 barrels to 394.9 million, according to the EIA, Department of Energy’s statistical arm. Last week, they were at the highest level since 1931. Analysts surveyed by Bloomberg expected a gain of 450,000. Production declined 48,000 barrels a day to 7.32 million in the week ended May 10 from the most since February 1992.

“I am looking at the DOE report and it certainly doesn’t look like a bullish one,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.

Gasoline supplies surged 1.2 percent to 217.7 million barrels, and distillate stockpiles climbed 2 percent to 119.9 million barrels, the EIA said. Analysts had expected a decline in gasoline stocks. Refinery utilization increased 1 percentage point to 88 percent, the highest level since Jan. 4.

“You have this huge build in gasoline that people weren’t expecting,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Crude should really be moving lower.”

Implied volatility for at-the-money WTI options expiring in July was 21.5 percent at 3 p.m., compared with 21.5 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 633,971 contracts as of 3:05 p.m. It totaled 611,364 contracts in the previous session, 5.7 percent above the three-month average. Open interest was 1.76 million contracts.

Before it's here, it's on the Bloomberg Terminal.