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Oil Rises to Seven-Week High as Global Equity Markets Advance

Crude oil rose to a seven-week high as equity markets advanced, increasing optimism that a growing global economy will bolster fuel demand.

Oil climbed as much as 2.9 percent as the MSCI Emerging Markets Index climbed to its highest level in five weeks after India’s economy improved. The gain accelerated as the dollar weakened against the euro, raising demand for commodities as an alternative investment.

“We are seeing new fund money come into commodities,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Everyone is focused on growth and how best to profit from it. There are still a lot of jobless but the economy has begun to grow.”

Crude oil for April delivery rose 97 cents, or 1.2 percent, to $79.67 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $80.95, the highest level since Jan. 12.

Oil has traded between $69.50 and $83.95 a barrel this year. Futures have topped $80 every day since Feb. 19.

“This is still a range-bound market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We are testing the top end of the range right now on some positive economic sentiment, but it’s questionable whether we can actually break through.”

The dollar slipped 0.3 percent against the euro to $1.3603, from $1.3560 yesterday.

Gold Gains

The Reuters/Jefferies CRB Index of 19 commodities climbed 0.9 percent to 275.09. Gold futures for April delivery rose $19.10, or 1.7 percent, to settle at $1,137.40 an ounce on the Comex division of the Nymex. It was the biggest gain for the precious metal since Feb. 16.

“There’s no single news item behind today’s move,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. After trading in a range of about $77 to $80.50 last week, “it is questionable if it can continue to advance from here.”

The Standard & Poor’s 500 Index gained 4.27, or 0.4 percent, to 1,119.98. The Dow Jones Industrial Average rose 11.11, or 0.1 percent, to 10,414.90.

“The direction is coming from equity markets and economic data,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “People are of the opinion the economic situation won’t get much worse, so they don’t want to miss out on buying oil. If we get to $81, I see the possibility of heading towards $90 on technical considerations.”

Inventory Forecast

An Energy Department report tomorrow will probably show that U.S. inventories rose 1.25 million barrels last week, according to the median of 15 responses by analysts surveyed by Bloomberg News.

Stockpiles of distillate fuel, a category that includes heating oil and diesel, declined 1 million barrels in the week ended Feb. 26, the survey showed. Gasoline supplies increased 200,000 barrels, according to the median of responses.

Gasoline for April delivery increased 5.3 cents, or 2.5 percent, to $2.2086 a gallon in New York. Futures have increased 7.7 percent in the past two weeks.

“Gasoline has been strong over the last weeks, which is helping pull crude oil higher,” said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. “We’re also getting help from Brent. The Brent market is getting a boost because the Europeans are a little more confident that there will be a resolution to the Greek crisis.”

Brent Rises

Brent crude for April delivery rose $1.22, or 1.6 percent, to $78.11 a barrel on the London-based ICE Futures Europe exchange.

The Greek government will announce as much as 4.8 billion euros ($6.5 billion) of additional deficit cuts tomorrow, bowing to pressure from the European Union and investors to do more to tame the region’s biggest shortfall, a person familiar with the plan said.

EU Monetary Affairs Commissioner Olli Rehn said yesterday that Greece must reveal new measures to allay officials’ concerns that the current austerity plan falls short.

Nigerian crude output for the Forcados export terminal has been reduced by more than 300,000 barrels a day because of sabotage on a Royal Dutch Shell Plc pipeline, state-owned Nigerian National Petroleum Corp. said today.

The Trans Forcados pipeline has 55 “vandalized points,” and 140 million cubic feet a day of natural gas has been deferred for the same reason, the company known as NNPC said in an e-mailed statement.

Oil volume on the Nymex was 454,804 contracts as of 2:30 p.m. in New York. Volume totaled 508,010 contracts yesterday, 14 percent less than the average of the past three months. Open interest was 1.28 million contracts.

Source: Bloomberg.com