ECONOMIC INDICATORS

Oil rises for third time in 4 days as U.S. inventories fall

BLOOMBERG FILE PHOTO/PHIL WEYMOUTH
OIL ROSE for the third time in four days as U.S. inventories fell unexpectedly last week and fewer Americans than forecast filed applications for unemployment benefits.
Posted 11/21/12

NEW YORK - Oil advanced for the third time in four days as U.S. inventories fell unexpectedly last week and fewer Americans filed applications for unemployment benefits.

Prices increased as stockpiles of crude and oil products dropped and jobless claims decreased by 41,000. Oil pared gains after Israel and Hamas agreed to a cease-fire, reducing concern that supplies would be disrupted.

“The inventory report is driving oil up,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. “Certainly the fundamentals are looking more bullish for oil. The cease-firing is taking some geopolitical premium off the table.”

Crude oil for January delivery gained 58 cents, or 0.7 percent, to $87.33 a barrel at 1:34 p.m. on the New York Mercantile Exchange. The price reached $87.89 in earlier trading.

Brent for January settlement advanced 88 cents, or 0.8 percent, to $110.71 a barrel on the ICE Futures Europe exchange in London.

Oil inventories decreased for the first time in three weeks to 374.5 million barrels, the Energy Department said. The median estimate of 11 analysts surveyed by Bloomberg was a gain of 1 million.

Gasoline inventories fell 1.55 million barrels to 200.4 million. Distillate supplies, which include heating oil and diesel, dropped 2.68 million to 112.8 million, the lowest level in more than four years.

“The report is supportive,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We have declines in each major category.”

Gasoline demand

Gasoline demand rose 1.2 percent in the four weeks ended Nov. 16 to average 8.74 million barrels a day, the Energy Department report showed.

“Demand is rising and that’s a good sign,” Lynch said.

U.S. jobless claims fell to 410,000 in the week ended Nov. 17 as damage to the labor market caused by superstorm Sandy began to subside, the Labor Department reported. The number of applications matched the median forecast of 48 economists surveyed by Bloomberg.

Oil also rose on signs that economic optimism is rising. The Conference Board’s gauge of the outlook for the next three to six months increased 0.2 percent after a revised 0.5 percent gain in September, the New York-based group said today. Economists projected the October gauge would climb 0.1 percent, according to the median estimate in a Bloomberg survey.

The Bloomberg monthly consumer expectations index rose to 4 in November from minus 7. The share of households in the Bloomberg survey projecting the economy will get better rose to 37 percent, the highest since March 2002.

‘Getting better’

“The U.S. economy is getting a little better,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Geopolitical headlines are definitely the market movers here.”

Oil dropped as much as 0.4 percent earlier after Secretary of State Hillary Clinton and Egyptian Foreign Minister Mohamed Amr said in Cairo that the truce accord was scheduled to take effect at 9 p.m. local time.

“Every time you hear something about a peace agreement, the market will fall,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The oil market is very sensitive to the Middle East.”

The conflict has threatened further instability in the Middle East and North Africa, regions accounting for more than 35 percent of global crude production, according to BP Plc’s Statistical Review of World Energy.

“There are concerns about oil supply, but the odds of a wider dispute and the odds of an oil supply disruption are relatively low,” Evans said.

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