BLBG: Crude Oil Trades Near Highest in Four Months as Stocks Gain
Crude oil traded near the highest level in almost four months after the U.S. stock market advanced, signaling that fuel use in the world’s biggest energy-consuming country will rebound.
Oil climbed 3.3 percent yesterday after equities rose on speculation that the Obama administration’s plan to rid banks of distressed assets will spur growth. U.S. crude supplies probably increased last week as refiners repaired plants, according to a Bloomberg News survey before a government report tomorrow. Stockpiles are at the highest since June 2007.
“There’s been a positive reaction in the equities and the crude markets to the plan and that reflects optimism that the plan will help U.S. economic recovery,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “The broad picture still shows weakness in consumption so it doesn’t surprise me that we could see a lift in U.S. inventories.”
Crude oil for May delivery was at $53.65 a barrel, down 15 cents, at 11:57 a.m. Singapore time on the New York Mercantile Exchange. Prices are up 20 percent this year. Yesterday, oil gained $1.73 to $53.80 a barrel, the highest settlement since Nov. 28.
The MSCI Asia Pacific Index advanced 1.8 percent to 83.68 at 9:47 a.m. in Tokyo, adding to yesterday’s 3.4 percent gain. The Standard & Poor’s 500 Index increased 7.1 percent yesterday.
Crude also rose as the dollar dropped to near a two-month low against the euro, increasing the appeal of oil as a hedge against inflation.
“Over the last three weeks the U.S. dollar has dropped by around 6.5 percent, while Nymex crude oil has jumped by more than one fifth,” said Stephen Schork, president of the Schork Group. Inc. in a report today. “Coincidence? Of course not.”
Treasury Plan
The Treasury plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington.
The announcement provides details of an initial strategy laid out by Treasury Secretary Timothy Geithner last month, which caused a slump in stocks because it lacked an explanation of how the effort would work.
Other governments have announced efforts to increase their expenditures to bolster flagging economies. South Korea said today it will spend a record 17.7 trillion won ($13 billion) on cash handouts, loans, infrastructure and job training.
The stimulus will boost economic growth by 1.5 percentage points and help create 552,000 new jobs, according to a finance ministry estimates. The package, equivalent to 1.9 percent of gross domestic product, is more than double spending in 1998 during the Asian financial crisis.
Crude Inventories
Crude-oil stockpiles in the U.S. rose 1.1 million barrels in the week ended March 20 from 353.3 million the previous week, according to the median of 11 estimates by analysts before an Energy Department report this week. Ten of those surveyed said supplies increased and one said there was no change.
Refineries probably operated at 82.1 percent of capacity, unchanged from the week before, according to the median of responses in the survey. Utilization rates unexpectedly declined last week. Refiners often shut units for maintenance in January and February as attention shifts away from heating oil and before gasoline use rises with warmer weather.
Fuel Stockpiles
Gasoline stockpiles probably dropped 500,000 barrels from 215.7 million the prior week, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably declined 500,000 barrels from 145.5 million.
The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.
Brent crude oil for May settlement was at $53.30 a barrel, down 17 cents, on London’s ICE Futures Europe exchange at 12:05 p.m. Singapore time. The contract advanced $2.25, or 4.4 percent, to $53.47 a barrel yesterday. Prices ended the session at the highest level since Nov. 28.
