BLBG: Oil Rises to Highest in 5 Weeks as Pending Home Sales Increase
Crude oil rose to a five-week high as the number of Americans signing contracts to buy previously owned homes jumped along with spending on U.S. construction projects, signaling energy demand may improve with the economy.
Oil climbed as much as 1.4 percent and the Standard & Poor’s 500 Index came within 1 percent of erasing its 2009 loss as the National Association of Realtors said the index of signed purchase agreements jumped 3.2 percent in March, compared with a 2 percent gain in February. Crude also rose as the dollar fell.
“People are pinning their thoughts on things getting better as we go through the year,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market seems to be looking forward rather than at what’s immediately overhanging.”
Crude oil for June delivery rose 52 cents, or 1 percent, to $53.72 a barrel at 11:05 a.m. on the New York Mercantile Exchange. Futures touched $53.94 a barrel, the highest since March 27.
Spending on U.S. construction unexpectedly rose in March for the first time in six months as increases in commercial and government projects overshadowed a drop in home building.
The dollar fell against the euro for a second day. The euro rose as much as 0.6 percent to $1.3357. It gained 0.81 cent to $1.3354 at 11:05 a.m. in New York.
The S&P 500 climbed to the highest intraday level in four months. It added 2.4 percent to 898.47 at 11:05 a.m. in New York. The advance adds to a 9.4 percent increase in April, the best month for stocks since 2000. The Dow Jones Industrial Average gained 192.51 points, or 2.3 percent, to 8,404.92. Stocks in Europe and Asia also increased.
External Factors
“The price of oil is being driven by external factors, and crude has been responding more to the direction of the equities market,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The oil market is due for a little bit of a fundamental correction because oil is tremendously oversupplied.”
U.S. oil inventories probably rose 2.55 million barrels last week from 374.7 million barrels, the highest since September 1990, based on the median estimate of six analysts surveyed by Bloomberg.
“We’re sitting on a large reservoir of oil, and we’re facing another build in inventories this week, because we’re not cracking any oil,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “Cracking” refers to the process by which refiners turn oil into gasoline, jet fuel, heating oil and other products.
Chinese Expansion
A Chinese manufacturing index expanded for the first time in nine months, a sign that the world’s third-biggest economy may be recovering. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 50.1 in April from 44.8 in March, CLSA Asia-Pacific Markets said today in a statement. A reading above 50 indicates an expansion.
Energy demand from China helped fuel oil’s rally to a record $147.27 a barrel last year.
An official Chinese manufacturing index released May 1 has shown expansion for two straight months. The government-backed measure is weighted more than the CLSA index toward large state- owned enterprises, which benefit more quickly from stimulus measures, according to JPMorgan Chase & Co.
“Oil has been pretty well supported above $50 a barrel over the past six weeks, and overall the market is very much linked to the performance of equities,” said Olivier Jakob, managing director of consultants Petromatrix GmbH.
Brent crude oil for June settlement rose 92 cents, or 1.7 percent, to $53.77 a barrel in electronic trading on London’s ICE Futures exchange. U.K. financial markets were closed today for a holiday.
