BLBG:Oil Rises After Fed Says U.S. Economy Will Pick Up
Oil capped the longest rally in two months after Federal Reserve policy makers said they expect growth to accelerate gradually and held off on more steps to boost the economy.
Futures climbed 0.6 percent and equities rose as the Federal Open Market Committee said it “expects economic growth to remain moderate over coming quarters and then to pick up gradually.” Crude fell earlier as U.S. supplies gained and Iran’s envoy in Moscow said his country is considering a proposal to halt the expansion of its nuclear program.
“We’re seeing an impact of the Fed statement in all the markets,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The fact that the economy is expected to grow is good for demand. They also left room for stimulus at some point in the future.”
Crude oil for June delivery rose 57 cents to $104.12 a barrel on the New York Mercantile Exchange, a one-week high. Prices have advanced 1.8 percent in the past four days, the longest rally since the period ended Feb. 24. Futures are up 5.4 percent this year.
Brent oil for June settlement increased 96 cents, or 0.8 percent, to end the session at $119.12 a barrel on the London- based ICE Futures Europe exchange. It was the highest settlement since April 13.
The Fed remains prepared to take additional action if needed to boost the economy, Chairman Ben S. Bernanke said at a press conference today following the FOMC meeting in Washington.
Equity Increase
Equities also advanced as earnings beat estimates at companies including Apple Inc. and Boeing Co. (BA) The Standard & Poor’s 500 (SPX) Index was up 1.3 percent and the Dow Jones Industrial Average was 0.6 percent higher.
“Equities are quite strong, which is giving us a boost,” said Kyle Cooper, director of IAF Advisors, a Houston-based consulting firm. “There’s a strong correlation between the equity and oil markets.”
Crude inventories rose 3.98 million barrels to 373 million last week as output climbed to a 12-year high. Stockpiles were projected to increase 2.8 million barrels in the week ended April 20, according to the median of 11 analyst estimates in a Bloomberg survey.
U.S. crude oil production grew 70,000 barrels to 6.11 million barrels a day last week, the highest level since November 1999, the report showed.
Iranian Tension
Oil in New York reached $110.55 on March 1, the highest intraday level since May 4, amid speculation that Western sanctions aimed at halting Iran’s nuclear program would disrupt Middle East shipments. Prices have fallen 5.8 percent since that peak since tensions have eased.
“Oil will drop $5 to $10 if the Iranian nuclear crisis is resolved,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado. “Investors mustn’t be taking either the Russian offer or Iranian statement all that seriously.”
Iran is studying a Russian proposal to halt the expansion of its nuclear program to avert new sanctions, Mahmoud Reza Sajjadi, the Iranian ambassador to Russia, said in an interview today at the embassy in Moscow. The plan, announced by Deputy Foreign Minister Sergei Ryabkov last week, would allow Iran to avoid a European Union ban on imports of its crude that is scheduled to start July 1.
Russian Plan
Under the Russian proposal, Iran would stop building centrifuges, machines used to enrich uranium, and mothball ones that haven’t been put into use yet.
“There is very little information about the Russian proposal,” said Mike Wittner, head of oil market research at Societe Generale SA in New York. “I’m dismissing it because there have been many failed proposals.”
Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, pumped 3.39 million barrels of oil a day last month, the lowest level since June 2002, according to data compiled by Bloomberg. Saudi Arabia is the leading producer.
“Any resolution of the dispute between Iran and Europe could see much lower prices, heading toward $100 a barrel,” said Ehsan Ul-Haq, senior market consultant at KBC Energy Economics in Walton-on-Thames, England. “If they are able to find a solution that suits both sides, then Brent is likely to fall to between $100 to $110 a barrel in a matter of days.”
Electronic crude trading volume of on the Nymex was 490,111 contracts as of 3:45 p.m. Volume totaled 369,531 contracts yesterday, the lowest level since March 26 and 41 percent below the three-month average. Open interest was 1.54 million.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
