Oil Rises From Four-Month Low in New York on U.S. Demand, Supply Outlook

Oil rose in New York as speculation U.S. fuel demand will increase prompted investors to buy contracts after prices fell to the lowest in four months.

Crude climbed as much as 0.9 percent before a report today that may show a rebound in consumer confidence in the U.S., the world’s biggest user of the commodity. U.S. oil stockpiles probably dropped to the lowest in two months, according to a Bloomberg News survey. Futures yesterday slid after consumer spending stagnated in May. Prices are gaining after holding above a long-term Fibonacci technical support level.

“On a global basis, demand growth now should be very steady,” said Tetsu Emori, a commodity-fund manager at Astmax Ltd. in Tokyo. “Some bearish information has been coming up but in general, the market is looking for a range between $90 and $100 a barrel.”

Crude for August delivery rose as much as 80 cents to $91.41 a barrel in electronic trading on the New York Mercantile Exchange. It was at $90.78 at 12:21 p.m. Singapore time. Yesterday, the contract fell 0.6 percent to $90.61, the lowest settlement since Feb. 18. Futures have gained 16 percent in the past year.

Brent oil for August settlement on the London-based ICE Futures Europe exchange climbed as much as 85 cents, or 0.8 percent, to $106.84 a barrel. The European benchmark contract was at a premium of $15.15 to U.S. futures. On June 15, the difference between front-month contracts reached a record $22.29.

Brent Backwardation

BNP Paribas SA said investors could benefit from betting that near-term Brent crude futures will revert to a premium over longer-dated contracts as the effect of the International Energy Agency’s stockpile release wears off.

Brent futures may return to backwardation, a structure in which prompt prices are higher than later contracts, the Paris- based bank’s analysts, led by Harry Tchilinguirian, said in a report yesterday. The IEA’s plan to sell about 2 million barrels a day of oil over 30 days will be insufficient to make up for supply disruption in Libya, the bank said.

The Conference Board’s index of U.S. consumer confidence will climb to 61 in June from 60.8 in May, which was the lowest in half a year, according to the median estimate of 69 economists surveyed by Bloomberg News. The report is scheduled for release at 10 a.m. in New York.

U.S. crude inventories fell as refiners boosted gasoline output before the Fourth of July holiday, according to the median estimate of 10 analysts polled before an Energy Department report tomorrow. Supplies dropped 1.5 million barrels, or 0.4 percent, to 362.3 million in the seven days ended June 24. The industry-funded American Petroleum Institute will report its own data today.

U.S. Refineries

Refineries are expected to have operated at an average of 89.2 percent of capacity, unchanged from the prior week’s 10- month high, as they made gasoline to meet demand from motorists traveling during the U.S. Independence Day weekend, typically the peak consumption period.

Crude also rose after prices held above a long-term support level on weekly technical charts. Futures in the past two sessions traded below $89.84 a barrel before settling higher. That’s the 50 percent Fibonacci retracement of the drop to $32.40 in December 2008 from an all-time high of $147.27 in July that year, according to data compiled by Bloomberg. A breach of technical support usually means prices will continue to fall.

“Ninety dollars seems to be quite firm support at the moment,” said Emori at Astmax. “Current fundamentals make selling below $90 too risky.”

Atlantic Low-Pressure

A low-pressure weather system in the Bay of Campeche has a 50 percent chance of becoming the Atlantic’s first named storm this year, according to the U.S. National Hurricane Center in Miami. The hurricane season runs from June 1 to Nov. 30.

Oil is headed for the first quarterly drop in a year on speculation global economic growth will slow and damp fuel demand. New York futures are down 15 percent since March 31 and Brent has lost 9.8 percent.

Crude fell 4.6 percent on June 23, the most in six weeks, after the International Energy Agency said it will release 60 million barrels in emergency stockpiles. There’s no need for such action, the president and secretary-general of the Organization of Petroleum Exporting Countries said separately yesterday.

“We should be looking more on the fundamentals side, rather than oil-related matters,” said Emori at Astmax. “The most important thing is how soon the U.S. economy will be again rebounding.”

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net