Bloomberg News

Oil Rises for Third Day on U.S. Economy, Euro Pledge

July 26, 2012

Oil rose for a third day as U.S. reports on durable goods and jobless claims reduced concern that economic growth is slowing, and the head of the European Central Bank pledged that the euro will survive.

Prices gained 0.5 percent as bookings for goods meant to last at least three years climbed more than projected in June and fewer Americans than forecast filed first-time claims for unemployment insurance payments last week. ECB President Mario Draghi said policy makers will do whatever is needed to preserve the European common currency.

“The bullish economic news is the main thing pushing oil prices up, and it does look a little more like we are seeing a turnaround in the economy,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Draghi said they are going to defend the euro and it gave the market more confidence.”

Crude for September delivery rose 42 cents to settle at $89.39 a barrel on the New York Mercantile Exchange. Prices have increased 15 percent from the year’s closing low of $77.69 a barrel on June 28.

Brent oil for September settlement climbed 88 cents, or 0.8 percent, to end the session at $105.26 a barrel on the London- based ICE Futures Europe exchange.

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi said in a speech at the Global Investment Conference in London today. “Believe me, it will be enough.”

Equities Advance

Equities and commodities gained on speculation the ECB will act to lower Spanish borrowing costs after yields on the nation’s bonds rose to levels that prompted bailouts for Greece, Portugal and Ireland. The ECB started buying Spanish and Italian debt in August last year as part of its bond purchase program.

“Draghi’s comments reinforced the positive sentiment that Europe will print more money to stimulate the economy,” said Jacob Correll, a Louisville, Kentucky-based analyst at Summit Energy Inc., which manages more than $20 billion in companies’ annual energy spending.

The Standard & Poor’s 500 Index climbed 1.8 percent at 3:42 p.m. in New York. The Stoxx Europe 600 Index jumped 2.5 percent at the close of trading for its biggest gain since June 29. The S&P’s GSCI Index of 24 commodities gained 0.3 percent.

The euro strengthened as much as 1.4 percent against the dollar. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.

“Draghi speaks, the market responds,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “The ECB said it will defend the euro, and that boosted confidence.”

Durable Goods

In the U.S., durable goods orders increased 1.6 percent for a second month, the Commerce Department reported today in Washington. The median forecast of economists surveyed by Bloomberg called for a 0.3 percent gain.

Applications for jobless benefits decreased by 35,000 in the week ended July 21 to 353,000, Labor Department figures showed. Economists forecast 380,000 claims, according to the median estimate in a Bloomberg survey.

“The durable goods and jobless claims numbers are positive for the economy and they are driving oil prices up,” said Carl Larry, president of Oil Outlooks & Opinions LLC in New York. “All markets from commodities to equities are following Draghi’s comments.”

U.S. Growth

U.S. gross domestic product probably grew 1.4 percent in the second quarter, the slowest pace in a year, according to a Bloomberg survey before a Commerce Department report tomorrow.

“Today’s numbers were definitely positive, but the big news for the remainder of the week is going to be GDP,” Ilczyszyn said.

The U.S. is the world’s biggest oil consuming country, using 18.8 million barrels a day in 2011, according to the BP Statistical Review of World Energy.

The Organization of Petroleum Exporting Countries will trim exports through the middle of next month as refiners cut their crude intake during seasonal maintenance, according to tanker- tracker Oil Movements.

OPEC, responsible for about 40 percent of global supplies, will curb daily exports by 0.3 percent to 23.84 million barrels a day in the four weeks to Aug. 11, compared with 23.91 million a month earlier, the researcher said today in an e-mailed report. The data exclude Angola and Ecuador.

Electronic trading volume on the Nymex was 335,563 contracts as of 3:42 p.m. in New York. Volume totaled 488,048 contracts yesterday, 13 percent below the three-month average. Open interest was 1.39 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: Bill Banker at bbanker@bloomberg.net


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