July 6 (Bloomberg) -- Oil rose for a second day in New York on speculation U.S. crude inventories declined for a fifth week, signaling fuel demand may be climbing in the world’s biggest user of the commodity.
Futures added as much as 0.9 percent, extending a 2.1 percent rally yesterday, before an Energy Department report tomorrow that may show crude stockpiles dropped, the longest decline since January. The industry-funded American Petroleum Institute will report its own data today. U.S. oil supplies have fallen 3.8 percent since the end of May at the start of the peak gasoline-consumption period and the Atlantic hurricane season.
“Inventories drawing, the summer drive-time and the hurricane season all provide that flavor for a market that wants to continue higher,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts oil in New York will average $100 a barrel this year. “I’d expect more gains to be had in the oil market.”
Crude for August delivery rose as much as 90 cents to $97.79 a barrel in electronic trading on the New York Mercantile Exchange. It was at $97.71 at 2:11 p.m. Singapore time. Yesterday, the contract advanced $1.95 to $96.89, the highest settlement since June 14. Futures have gained 36 percent in 2011.
Floor trading was closed July 4 for the U.S. Independence Day holiday and electronic trades were booked with yesterday’s transactions for settlement purposes.
Brent crude for August settlement on the London-based ICE Futures Europe exchange climbed as much as 69 cents, or 0.6 percent, to $114.30 a barrel. The European benchmark contract was at a premium of $16.45 to U.S. futures. The spread reached a record $22.29 on June 15.
U.S. crude inventories shrank 2.5 million barrels from 359.5 million in the week ended July 1, according to the median estimate of 11 analysts surveyed by Bloomberg News. All respondents expect a drop.
Gasoline stockpiles probably increased 1 million barrels from 213.2 million, based on the survey. Supplies are down for two weeks as imports declined.
Oil rose yesterday after a Commerce Department report showed orders placed with U.S. factories increased 0.8 percent in May, below a median economist forecast of 1 percent. The Institute for Supply Management’s index of service industries, due for release tomorrow, may decrease.
“There was a good deal of ‘fact-fitting’ with traders talking about vague optimism for the second half,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in a note. “Nothing really fit well for us and the reasons used to describe the advance of the last few days have hung like designer dresses on homeless models. They just don’t look right.”
Oil’s rally in New York may stall around $98 a barrel as prices approach technical resistance, according to data compiled by Bloomberg. Front-month futures are below the 61.8 percent one-year Fibonacci retracement on the daily chart. A failure to breach resistance usually means prices will change direction.
Barclays Plc yesterday increased its 2012 forecasts for Brent and U.S. benchmark West Texas Intermediate crude prices.
Brent will average $115 a barrel next year, up $10 from the previous estimate March 24, Barclays analysts led by Paul Horsnell in London said in a report. The bank increased its 2012 outlook for U.S. futures by $4 to $110 and cut its 2011 prediction by $6 to $100.
--With assistance from Christian Schmollinger. Editors: Jane, Ching Shen Lee, Alexander Kwiatkowski
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