Oil increased to a four-month high as German investor confidence climbed more than economists expected and a Bloomberg survey showed that international optimism about equities gained.
Futures rose 0.7 percent after Germany’s ZEW Center for European Economic Research said its index of investor and analyst forecasts climbed to 31.5 from 6.9 last month. Global investors are the most bullish on stocks in at least 3 1/2 years, with almost two-thirds planning to boost holdings during the next six months, a Bloomberg survey showed.
“We’re seeing a slow steady return of confidence in the economy,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There’s been a return of bullish sentiment to almost all markets.”
Crude oil for February delivery rose 68 cents to $96.24 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 17. February futures expired today. The more-active March contract gained 64 cents to settle at $96.68.
Yesterday’s transactions in New York will be booked with today’s trades for settlement purposes as there was no floor trading because of the Martin Luther King Jr. Day holiday.
Brent oil for March settlement gained 71 cents, or 0.6 percent, to end the session at $112.42 a barrel on the London- based ICE Futures Europe exchange.
The European benchmark traded at a $15.74 premium to West Texas Intermediate crude futures traded in New York. The spread was $15.16 on Jan. 17, the narrowest level based on closing prices since July 24.
The spread has shrunk since Enterprise Products Partners LP (EPD:US) and Enbridge Inc. (ENB) resumed service of the Seaway pipeline running from Cushing to the Gulf Coast on Jan. 11 at a capacity of 400,000 barrels a day, up from 150,000 barrels. The link provides an outlet for record supplies in the central U.S.
“The improvement of the economy is helping WTI, along with the continued narrowing of the Brent spread,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “As new lines open up, relieving the bottleneck in the middle of the country, WTI will gain strength.”
The ZEW index, which aims to predict German economic developments six months in advance, climbed to the highest level since May 2010 and showed the biggest gain in 11 months. Economists forecast an increase to 12, according to the median of 39 estimates in a Bloomberg survey.
“We’re getting a boost from increasing investor confidence both in Germany and, as a Bloomberg survey shows today, in the rest of the world,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There should be an increasing investment flow, boosting prices.”
The Bloomberg Global Poll also showed that 53 percent of respondents say equities will offer the highest return in the next year. That’s a 17 percentage point jump from the last poll in November and the most since the quarterly survey of investors, analysts and traders who subscribe to Bloomberg began in July 2009.
The Standard & Poor’s 500 Index (SPX) and the Dow Jones Industrial Average climbed 0.3 percent.
Republicans in the House of Representatives plan a vote tomorrow on a plan to raise the government’s borrowing limit until May 19. The Treasury Department has said the U.S. will exceed its $16.4 trillion borrowing authority sometime between mid-February and early March.
“The threat of a debt default in the next few months has been put off for at least a few months, which will be good for the markets,” Kilduff said. “The economy should do better and that will be good for oil demand.”
Futures climbed last week as an attack on the BP Plc- operated gas field last week in Algeria led to concern that militants may carry out a similar assault on energy facilities elsewhere in the region.
Neighboring Libya, which holds Africa’s biggest crude reserves, is producing 1.1 million barrels a day, Oil Minister Abdulbari Al-Arusi said in an interview in Tripoli yesterday. That’s less than the International Energy Agency’s estimate for last month of 1.4 million barrels. The country’s daily output may rise to 2 million barrels in two years, he said.
Goldman Sachs analysts, led by Stefan Wieler in New York, said today that West Texas Intermediate oil will average $96.50 in 2014, down from an estimate of $98 on Dec. 20.
Electronic trading volume on the Nymex was 472,943 contracts as of 3:26 p.m. Volume totaled 563,464 contracts Jan. 18, 15 percent above the three-month average. Open interest was 1.49 million.
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