Bloomberg News

Crude Advances on Housing Starts, Gasoline Inventories

July 18, 2012

Crude Rises Past $90 on Housing Starts, Gasoline Inventories

The decline in gasoline stockpiles, to 205.9 million barrels, was the first in five weeks. Inventories are below the 10-year seasonal average. Photographer: Scott Eells/Bloomberg

Oil advanced for a sixth day, exceeding $90 a barrel for the first time since May, as U.S. housing starts increased more than forecast and gasoline inventories fell.

Prices rose after the Commerce Department reported housing construction reached a 760,000 annual pace in June. Gasoline stockpiles declined 1.82 million barrels last week, the Energy Department reported. Analysts surveyed by Bloomberg expected a gain of 1.2 million.

“It’s a confirmation that the housing market has bottomed out and it raises hopes for a good second half and better oil demand,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The inventory report is moderately bullish with the decline in gasoline inventories.”

Oil for August delivery increased 65 cents, or 0.7 percent, to settle at $89.87 a barrel on the New York Mercantile Exchange. The price ranged from $88.59 to $90.04, the highest intraday level since May 30. Prices are down 9.1 percent this year.

Brent crude for September settlement gained $1.16, or 1.1 percent, to $105.16 a barrel on the London-based ICE Futures Europe exchange.

Oil moved up with equities after housing starts advanced 6.9 percent last month, beating the median forecast of 79 economists surveyed by Bloomberg. The June pace of home starts was the fastest since October 2008. The Commerce Department also revised the May data upward to an annual rate of 711,000.

‘Mildly Supportive’

“When you get one of the best numbers since 2008, it’s certainly going to be mildly supportive,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The decline in gasoline in the inventory report helped to support prices.”

The Standard & Poor’s 500 Index advanced for a second day, rising 0.6 percent at 3:13 p.m. The S&P’s GSCI Index of 24 commodities increased 1.1 percent.

“The housing data was strong and is helping the oil market,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Oil is moving in tandem with stocks.”

The decline in gasoline stockpiles, to 205.9 million barrels, was the first in five weeks. Inventories are below the 10-year seasonal average.

Refineries reduced their utilization rate to 92 percent from the previous week’s 92.7 percent, the highest level in five years, the Energy Department report showed.

Gasoline Demand

Demand for gasoline slid 3.2 percent to 8.63 million barrels a day. Total petroleum consumption increased 0.3 percent to 18.6 million barrels a day.

Crude inventories dropped 809,000 barrels to 377.4 million, less than the decline of 1.3 million that was the median forecast of 10 analysts surveyed by Bloomberg. Distillates rose 2.62 million barrels to 123.5 million, exceeding a forecast gain of 1.3 million.

“This is a temporary spike,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “We still have plenty of oil and I still think the long-term trend is lower.”

Technical indicators also supported crude, which exceeded the 20-day moving average June 29 for the first time since May 2 and topped the 50-day moving average for a third day.

“From a technical standpoint, oil has triggered a level that a lot of people have been looking at,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “The $90 level is bullish.”

Futures fell earlier as the euro neared a two-year low against the dollar, with analysts cutting European profit estimates and growth in China slowing for a sixth quarter. A stronger dollar and weaker euro reduce oil’s appeal as an investment alternative.

Electronic trading volume on the Nymex was 485,562 contracts as of 3:13 p.m. in New York. Volume totaled 615,802 contracts yesterday, 10 percent above the three-month average. Open interest was 1.4 million.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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