Oil Rises, Capping Best Month Since March, as Commodities Surge
July 30, 2010, 5:58 PM EDTBy Margot Habiby
July 30 (Bloomberg) -- Crude oil increased, capping its biggest monthly gain since March, as rallies in commodities led by wheat and aluminum took the S&P GSCI Commodity Index to a 12- week high.
Oil rebounded from a 2 percent intraday drop as wheat jumped to the highest price in almost 14 months and aluminum rose to an 11-week high. Futures also advanced after Syncrude Canada Ltd. said it plans to start maintenance in September on a unit at its upgrader in Alberta, Canada. Gasoline and heating oil contracts expired, adding to volatility.
“All the other commodities were higher,” said Phil Flynn, vice president of research at PFGBest in Chicago. “You had the expiration of the August contract and probably a bit of short- covering as well.”
Crude for September delivery increased 59 cents, or 0.8 percent, to settle at $78.95 a barrel on the New York Mercantile Exchange. The price rose $1.15 after 2 p.m. Futures gained 4.4 percent in July and 18 percent in the past year.
The S&P GSCI index jumped 1.2 percent to 524.809, the highest level since May 4. The Reuters/Jefferies CRB Index of 19 commodities advanced 1.5 percent to 274.35, the strongest since May 3. All 19 members of the index increased.
Syncrude Production
Canadian Oil Sands Trust, the largest owner of the Syncrude joint venture, lowered its annual production forecast by 5 million barrels to 110 million barrels in a second-quarter earnings report. It partially attributed the lower estimate to the 45-day work on its 8-1 coker.
“That’s going to take 100,000 barrels a day of refinery- grade crude out of the market,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Pile that onto the fact that August should be a heavy month for maintenance in the North Sea, and August and September will be tight months for crude.”
Gasoline for August delivery rose 0.92 cent, or 0.4 percent, to expire at $2.1066 a gallon. The more-active September contract increased 2.14 cents, or 1 percent, to settle at $2.1224.
The dollar was little changed near a 12-week low against the euro yesterday. A weak dollar boosts the appeal of commodities as an alternative investment.
The euro fell to $1.3052 as of 5 p.m. in New York, down from $1.3079 yesterday. It touched $1.3107 in intraday trading yesterday, the highest price since May 4.
GDP Growth
Earlier, oil touched $76.83 a barrel after U.S. economic growth in the second quarter missed economists’ estimates, a sign that fuel demand may be slow to rebound.
“What the GDP numbers are telling you, as many of the other economic indicators that have come out during the past six weeks have told us, is that we’re in a plateau,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “What’s going on in supply and demand right now is more supportive of prices near $70 than $90.”
The U.S. is the world’s biggest consumer of oil.
‘Sold Off Too Hard’
Oil fell as low as $75.90 this week after the Energy Department reported imports jumped to the highest level in almost four years, causing supplies to climb.
U.S. oil inventories jumped 7.31 million barrels to 360.8 million in the week ended July 23, the biggest increase since March 19, in the government report July 29. Analysts forecast a drop to a four-month low.
“Prices sold off too hard and dropped below the 100-day moving average of $78.25,” said Hamza Khan, an analyst at the Schork Group in Villanova, Pennsylvania. “Traders are just not willing to give that point up.”
Prices erased some of their losses today after a measure of business activity expanded in July more than forecast. The Institute of Supply Management-Chicago Inc. said its business barometer rose to 62.3 this month. Readings higher than 50 signal growth.
The number “was really a blowout,” said Matt Smith, a commodities analyst for Summit Energy Inc. in Louisville, Kentucky. “After that came out, crude had sort of made its lows and began gradually getting more positive as the day went on.”
Steady on Week
Crude oil fell 3 cents this week, its smallest weekly move in terms of actual price since December 2003. Futures haven’t settled below $70 since May 25 or above $80 since May 4.
“We’re just covering the same ground over and over,” said Michael Fitzpatrick, vice president of energy at MF Global in New York. “No new high was posted off the late-session rally.”
Brent crude for September settlement rose 59 cents, or 0.8 percent, to $78.18 on the London-based ICE Futures Europe exchange.
Oil volume in electronic trading on the Nymex was 415,491 contracts as of 5:15 p.m. in New York. Volume totaled 562,163 contracts yesterday, 19 percent below the average of the past three months. Open interest was 1.23 million contracts.
--Editors: Richard Stubbe, Dan Stets.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
