Oil rose from an eight-month low on speculation that policy makers will do more to stimulate the economy and on expectations that U.S. inventories dropped.
Prices gained 0.8 percent after Federal Reserve Bank of Chicago President Charles Evans said he would support a variety of measures to generate faster job growth. Oil supplies fell the most in almost five months last week as refineries boosted output, a government report may show tomorrow.
“There is a lot of political will to try to stem the decline and no one wants to see things get worse,” said Jacob Correll, a Louisville, Kentucky-based analyst at Summit Energy Inc., which manages more than $20 billion in companies’ annual energy spending. “If refinery utilization rates stay high, then you are definitely going to see a decent-sized draw.”
Oil for July delivery gained 62 cents to settle at $83.32 a barrel on the New York Mercantile Exchange. Futures closed at $82.70 yesterday, the lowest level since Oct. 6. Prices are down 16 percent this year.
Prices were little changed from the settlement after the American Petroleum Institute reported oil inventories increased 1.59 million barrels to 385.7 million last week. Futures rose 70 cents, or 0.8 percent, to $83.40 a barrel at 4:35 p.m. in electronic trading. They were at $83.40 before the report was released at 4:30 p.m.
Brent oil for July settlement fell 86 cents, or 0.9 percent, to $97.14 a barrel on the London-based ICE Futures Europe exchange.
“I’ve been in favor of pretty much any accommodative policy I’ve heard about,” Evans said on Bloomberg Television’s “In the Loop” with Betty Liu today. Extending the Twist, a plan expiring this month that lengthens the average duration of bonds in the Fed’s portfolio, “would be useful,” he said.
The policy-setting Federal Open Market Committee will meet next week as slowing jobs growth at home and a deepening crisis in Europe weigh on the economic outlook. Evans, who isn’t a voting member of the FOMC this year, has been one of the most vocal proponents of additional easing.
“The market is expecting more stimulus plans from the Fed,” said Phil Streible, a Chicago-based commodities broker at RJO Futures. “It’s still on the table.”
Oil stockpiles probably dropped 1.5 million barrels, or 0.4 percent, to 383.1 million in the seven days ended June 8, according to the median of 12 analyst estimates in the Bloomberg survey. The decline would be the biggest since Jan. 13.
U.S. refineries raised their utilization rate to 91 percent in the week ended June 1, the most in 22 months. The rate may have remained at the same level last week, the survey showed, increasing gasoline stockpiles for a second time from the smallest amount since November 2008.
Oil fell earlier as Fitch Ratings downgraded 18 Spanish banks and Saudi Arabian Oil Minister Ali al-Naimi said OPEC may need a higher output limit.
Fitch cited concerns on further loan deterioration, especially banks with exposure to construction and real estate. The rating agency said earlier that Spain will miss its budget- deficit targets, pushing the country’s cost of borrowing to a euro-era record.
“Fitch highlighted the financial turmoil that’s still going on in Europe and clearly it’s not a good thing for the market,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston.
“Maybe” there is a need for higher group production from the Organization of Petroleum Exporting Countries, al-Naimi said yesterday in response to questions from reporters as the minister arrived for the June 14 OPEC meeting in Vienna.
Al-Naimi’s comments came as Iran faces trade and financial restrictions over its nuclear program, with the European Union planning to embargo Iranian crude starting next month.
“The Saudis are sending an implicit message to the Iranians that if you want to play the nuclear game, we have the ability to drive oil prices even lower,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.
Demand for OPEC crude will be 30.92 million barrels a day in the third quarter, and 30.55 million in the fourth quarter, the group said in its monthly report released today. OPEC’s 12 members exceeded their collective quota by 1.58 million last month, according to secondary sources surveyed by the group.
The U.S. Energy Department reduced its crude-oil price projection for 2012 to $96.80 a barrel from $104.12 last month, according to its monthly Short-Term Energy Outlook, released today. Futures have averaged $100.09 so far this year.
Electronic trading volume on the Nymex was 534,117 contracts as of 4:33 p.m. in New York. Volume totaled 649,691 contracts yesterday, 16 percent above the three-month average. Open interest was 1.45 million.
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