Already a Bloomberg.com user?
Sign in with the same account.
Oil climbed to a three-month high in New York on speculation that euro-area leaders will make progress in resolving the region’s debt crisis this week.
Futures rose 0.7 percent after a senior lawmaker with Chancellor Angela Merkel’s party said concessions are possible for Greece. Merkel and French President Francois Hollande are scheduled to meet in Berlin on Aug. 23 before holding separate talks with Greek Prime Minister Antonis Samaras. The euro surged to a six-week high against the dollar.
“Positive sentiment is driving the market here,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The same factors that got us to three- month highs continue to be at work and with the proper spark, the market could easily tack on a couple more dollars to top $100.”
Crude oil for September delivery rose 71 cents to $96.68 a barrel on the New York Mercantile Exchange, the highest settlement since May 10. September futures expired today. The more actively traded October contract gained 58 cents, or 0.6 percent, to $96.84.
Prices were little changed from the settlement after the industry-funded American Petroleum Institute reported oil inventories dropped 6.04 million barrels last week to 361 million, a four-month low. The October contract was up 52 cents at $96.78 at 4:33 p.m. in electronic trading.
Brent oil for October settlement increased 94 cents, or 0.8 percent, to end the session at $114.64 a barrel on the London- based ICE Futures Europe exchange.
Concessions are possible for Greece as long as Samaras shows a willingness to meet the main targets set out in his country’s bailout program, Norbert Barthle, the budget spokesman in parliament for Germany’s Christian Democratic Union, said in a telephone interview.
Almost three years after the crisis came to light in Greece, the country remains at the heart of the turmoil even as contagion spreads to Italy and Spain, prompting European Central Bank chief Mario Draghi to announce proposals to re-enter the bond market to help lower government borrowing costs.
“There are hopes that the Europeans will get things together and the European economy will turn around, and that should help oil on the price side,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. Dollar weakness “is certainly bullish for oil.”
Equities rose with oil in early trading as the Standard & Poor’s 500 Index (SPX) reached a four-year high in intraday trading before giving up gains. The euro gained as much as 1.2 percent to $1.2488, the highest level since July 5. A stronger euro and weaker U.S. currency increase the appeal of dollar-denominated raw materials as an investment.
“The correlation between the markets ebbs and flows,” said Stephen Schork, president of The Schork Group Inc. in Villanova, Pennsylvania. “Right now, the correlation seems to be very strong. The move has little to do with fundamentals.”
The S&P GSCI Index of 24 commodities has moved into a bull market, as defined by a 20 percent increase from the year’s low. The index, which gained 19.7 percent from June 21 through yesterday, rose 0.9 percent today.
Brent’s premium to West Texas Intermediate oil, the grade traded in New York, widened 36 cents to $17.80 a barrel, based on October contracts. The European benchmark grade may stay more expensive than WTI in coming months because of field maintenance in the North Sea.
“We see Brent reaching $120 on a three-month horizon,” said David Greely, head of energy research at Goldman Sachs Group Inc. in New York.
Prices also gained on optimism that reports later this week will show the U.S. economy is starting to strengthen after a second-quarter slowdown. Combined purchases of new and existing houses increased in June, according to the median forecast in a Bloomberg survey. The National Association of Realtors will release existing sales tomorrow, with the Commerce Department publishing data on new sales the next day.
“We’re in a bi-modal environment,” Greely said. “The central path is one of modest world economic growth with an increase in oil demand that continues to tighten the oil market, forcing prices higher given constrained supplies. However, there is the ongoing risk that policy missteps in Europe, China or the U.S. could derail the world economic recovery, sending us back into recession.”
An Energy Department report tomorrow will probably show that U.S. crude stockpiles dropped 250,000 barrels last week to 365.9 million, according to the median of 12 analyst estimates in a Bloomberg survey. Oil inventories plummeted 3.7 million barrels to 366.2 million in the week ended Aug. 10, the lowest level since April.
Electronic trading volume on the Nymex was 462,203 contracts as of 4:33 p.m. in New York. Volume totaled 472,553 contracts yesterday, 13 percent below the three-month average. Open interest was 1.47 million.
To contact the reporter on this story: Mark Shenk in New York at email@example.com; Moming Zhou in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Dan Stets at email@example.com