Oil rose for a third day in New York after stockpiles dropped in the U.S., the world’s biggest consumer of crude, and economic reports pointed to more demand.
Futures gained as much as 0.9 percent. Crude inventories fell 1.8 million barrels last week, the industry-funded American Petroleum Institute said yesterday. An Energy Department report today may show supplies slid by 500,000 barrels, according to a Bloomberg News survey. U.S. service-industry growth unexpectedly increased, and Australia’s economic expansion beat estimates.
“The inventory decline doesn’t change the overall outlook much, but at least it’s headed in the right direction,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It suggests some sort of stabilizing. The services-sector data was a relief, and given that it’s such a big part of the U.S. economy, it gave the market room to pause.”
Oil for July delivery climbed as much as 75 cents to $85.04 a barrel in electronic trading on the New York Mercantile Exchange and was at $84.80 at 2:53 p.m. Singapore time. The contract yesterday rose 0.4 percent to $84.29, the highest close since May 31. Prices are 14 percent lower this year.
Brent oil for July settlement gained 26 cents, or 0.3 percent, to $99.10 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $14.30, compared with $14.55 yesterday.
New York crude is set to rebound based on a technical indicator that shows a decline of more than 20 percent from this year’s high into bear market conditions is the most-exaggerated drop in more than 26 years.
The relative strength index, or RSI, has been below 30 since May 11, signaling that oil is poised to climb, said Richard Ross, a technical analyst at brokerage Auerbach Grayson & Co. in New York. The 14-day RSI, which identifies possible turning points in markets, dropped to 16.3 on June 1, the lowest level since February 1986.
Oil is unlikely to collapse as it did in 2008 because long- term fundamentals haven’t changed and supply may not keep up with demand, Royal Dutch Shell Plc (RDSA) Chief Executive Officer Peter Voser said yesterday in Kuala Lumpur. It would be “irresponsible” to say that a few weeks of worse-than-expected economic data has significantly changed the market outlook, Maria van der Hoeven, the head of the International Energy Agency, said in the city.
Crude extended gains after a report showed Australia’s economy expanded last quarter at more than twice the pace forecast by economists. First-quarter gross domestic product advanced 1.3 percent from the previous three months, the Bureau of Statistics said in Sydney today. The median of 24 estimates in a Bloomberg News survey was for a 0.6 percent gain.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the U.S. economy, rose to 53.7 last month from April’s 53.5, the Tempe, Arizona-based group said yesterday. The median forecast of 75 economists surveyed by Bloomberg News projected 53.4. Readings above 50 signal expansion.
U.S. gasoline stockpiles rose 1.4 million barrels last week, figures from the API showed. They are forecast to climb 950,000 barrels in the Energy Department report, according to the median estimate of 12 analysts in the Bloomberg survey. Distillate inventories, a category that includes diesel and heating oil, gained 1.8 million barrels compared with a projected 250,000 increase.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey. The Department is scheduled to release its report at 10:30 a.m. in Washington.
To contact the reporter on this story: Ben Sharples in Melbourne at email@example.com
To contact the editor responsible for this story: Alexander Kwiatkowski at firstname.lastname@example.org