Crude Climbs for First Time in Three Days on Dollar

West Texas Intermediate crude rose for the first time in three days as the dollar weakened versus major peers amid concern that Mideast tension may trim supplies.

Oil gained 0.5 percent as the Dollar Index fell to the lowest level since February. Turkish protesters were driven out of Taksim Square yesterday by police as the biggest rallies in more than 10 years spread nationwide after May 31. Libya’s National Oil Corp. said yesterday that crude output has fallen to less than 1 million barrels a day after sabotage and labor unrest shut oilfields and ports.

“The dollar is down and we are getting some support from that,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There is a continuing focus on the Middle East, whether it’s Turkey or Libya’s production.”

WTI for July delivery rose 50 cents to settle at $95.88 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 3.7 percent below the 100-day average for the time of day at 3:47 p.m.

Brent for July settlement advanced 53 cents, or 0.5 percent, to $103.49 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.1 percent below the 100-day average for the time of day. Brent’s premium to WTI widened by 3 cents to $7.61. Yesterday, the spread shrank to its narrowest level in more than two years.

Dollar Drops

The Dollar Index, which measures the greenback against six other major currencies including the euro, dropped 0.2 percent after falling to 80.748, the lowest level since Feb. 20. A weaker dollar boosts oil’s appeal as an investment alternative.

“The dollar is going negative, so it’s positive for the oil market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We are watching the broader financial market.”

Turkey’s Taksim Solidarity group, which says it represents protesters, reiterated demands including the preservation of a park, the dismissal of governors and police chiefs in cities where demonstrators have been attacked, and the release of those detained during the rallies. Turkish markets plunged.

The Turkish Mediterranean port of Ceyhan is the export terminal for crude that’s transmitted via pipeline from northern Iraq, OPEC’s second-largest producer. It also receives Azeri Light crude from Baku, in the Azeri section of the Caspian Sea, via Georgia, through the 1,100-mile (1,768-kilometer) Baku-Tbilisi-Ceyhan pipeline.

Choke Point

Farther west, an estimated 2.9 million barrels a day of oil flowed through the Turkish Straits in 2010, according to the Energy Information Administration, which designates the straits as “one of the busiest and most dangerous choke points in the world supplying Western and Southern Europe.”

The straits, including two narrow waterways of the Bosporus and the Dardanelles, connect the Sea of Marmara with the Black Sea on one side and the Aegean arm of the Mediterranean Sea on the other. They are also considered the boundary between the continents of Europe and Asia.

Libya’s output has plunged by at least 600,000 barrels a day from more than 1.6 million in the middle of last year, state-run NOC said in a statement on its website. That would bring pumping to the lowest level since January 2012, when the nation’s oil industry was rebuilding after the fall of deposed leader Muammar Qaddafi the previous year, data compiled by Bloomberg indicates.

U.S. Supplies

Prices pared gains after the Energy Information Administration said U.S. inventories increased 2.52 million barrels last week to 393.8 million barrels a day. Analysts surveyed by Bloomberg had expected a drop of 1.5 million. Supplies surged to 397.6 million on May 24, the most since 1931.

“We are not running out of oil,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “This is a clearly a bearish data set overall.”

Gasoline supplies climbed 1.3 percent to 221.5 million barrels, an eight-week high. Distillate fuels, including diesel and heating oil, dropped 0.9 percent to 122.1 million.

Gasoline demand dropped 2 percent to 8.65 million barrels a day, the lowest level at this time of the year since 2003, according to the EIA, the Energy Department’s statistical unit.

“When you combine those two increases in crude and gasoline and compare them with falling demand, it’s another indicator that we have weak fundamentals,” McGillian said.

Inventories at Cushing, Oklahoma, the delivery point for New York futures, fell 1.5 percent to 49.3 million barrels.

“If you can focus narrowly on Cushing inventories, you do see a decline,” Evans said.

Demand Forecast

The International Energy Agency trimmed demand forecasts today for the amount of oil the Organization of Petroleum Exporting Countries needs to supply in the second half of 2013 on signs of slower Chinese growth.

“China has consistently been the focal point of global demand growth,” said Tom Finlon, the Jupiter, Florida-based director of Energy Analytics Group LLC. “If you have a projection for slower demand growth there, you’ll see prices be pressured.”

Implied volatility for at-the-money WTI options expiring in August was 20.5 percent, compared with 20.2 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 505,361 contracts as of 3:47 p.m. It totaled 582,901 contracts yesterday, 3.3 percent lower than the three-month average. Open interest was a record 1.82 million contracts.

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