Bloomberg News

Oil Advances a Second Day on Forecast U.S. Supply Drop, Greece

June 29, 2011

June 29 (Bloomberg) -- Oil rose for a second day in New York, extending the biggest gain in six weeks, on speculation U.S. crude inventories declined and steps by Greece’s government to prevent a default will bolster Europe’s economy.

Futures advanced as much as 0.7 percent after rallying 2.5 percent yesterday. U.S. oil stockpiles probably dropped for a fourth week, according to a Bloomberg News survey before an Energy Department report. Greece’s parliament will vote today on Prime Minister George Papandreou’s plan to cut spending and sell assets. The first tropical storm of the Atlantic hurricane season formed in the Gulf of Mexico.

“It’s very much a market that’s waiting for more information around the European situation,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicts oil will average $113 a barrel in the third quarter. “It still seems to be a major determinant of movements in these markets.”

Crude for August delivery rose as much as 66 cents to $93.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $93.32 at 4:01 p.m. Singapore time. Yesterday, the contract climbed $2.28 to $92.89, the highest settlement since June 22. Prices are up 2.1 percent so far this year.

Brent oil for August settlement on the London-based ICE Futures Europe exchange gained 47 cents to $109.25 a barrel, after falling as much as 0.6 percent. The European benchmark contract was at a premium of $15.96 to U.S. futures. On June 15, the spread reached a record $22.29.

Greece Vote

Oil is headed for the first quarterly decline in a year after Europe’s debt crisis bolstered speculation fuel demand will be reduced. New York futures are down 12.5 percent from the end of March, the worst second quarter since 1990. Brent has lost 6.8 percent.

Greek police fired tear gas to disperse protesters in Athens as labor unions shut down government services before today’s vote by lawmakers, aimed at averting Europe’s first sovereign default. Greece’s second rescue in less than two years is threatening to undermine the euro, the common currency shared by 17 nations.

U.S. crude inventories decreased 1.5 million barrels in the seven days ended June 24 from 363.8 million, according to the median estimate of 12 analysts surveyed by Bloomberg News. Refiners probably maintained operating rates at a 10-month high of 89.2 percent of capacity as they boosted gasoline production before the Fourth of July holiday.

The Energy Department will release its Weekly Petroleum Status Report at 10:30 a.m. in Washington. Yesterday, the industry-funded American Petroleum Institute said crude stockpiles slipped 2.7 million barrels to 360.3 million, the lowest in 10 weeks.

Tropical Storm

The first tropical storm of the Atlantic hurricane season, Arlene, formed in the southwestern Gulf of Mexico and may cause “life-threatening flash floods and mudslides,” said the U.S. National Hurricane Center.

Arlene is moving west-northwest near 7 miles (11 kilometers) an hour, with a turn toward the west forecast today, the center said in a bulletin at about 11 p.m. New York time yesterday. The storm is packing maximum sustained winds near 40 mph, below the 74-mile threshold for hurricanes.

Petroleos Mexicanos, Mexico’s state-owned oil company and Latin America’s largest crude producer, has wells in the Bay of Campeche, south of the storm. Mexico is the second-biggest oil exporter to the U.S. and supplied 1.19 million barrels a day in March, the latest month for which Energy Department data is available.

Oil in New York settled higher than two technical- resistance levels yesterday, signaling the market may extend gains. Futures climbed above a Fibonacci retracement level at $92.79 a barrel and the 200-day moving average, which is at $92.90 today, according to data compiled by Bloomberg.

--Editors: Paul Gordon, Jane, Ching Shen Lee

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Yee Kai Pin in Singapore at kyee13@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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