BLBG:Oil Rises From Six-Month Low on Japan Data, Pipeline Reversal
Oil rebounded from a six-month low in New York after Japan’s economy expanded faster than estimated in the first quarter and amid expectations an inventory glut at the main U.S. storage hub in Oklahoma may ease.
West Texas Intermediate advanced as much as 1 percent, climbing for the first time in five days, as Japan’s economy expanded an annualized 4.1 percent in the first quarter. Oil also gained as Enbridge Inc. and Enterprise Products Partners LP prepared to reverse flows on the Seaway pipeline, pumping crude south from Cushing, Oklahoma, to the Gulf Coast. Brent traded below $110 for a barrel for the first time since January.
“There’s been some good buying out of Asia after the Japanese data,” said Robert Montefusco, senior broker at Sucden Financial Ltd. in London. “WTI had been taking a battering lately with all the stock builds, so if we get confirmation of crude moving down the reversed pipelines that may encourage buying,” he said.
Crude for June delivery rose as much as 91 cents to $93.72 a barrel in electronic trading on the New York Mercantile Exchange and was at $93.32 at 9:54 a.m. London time. The contract yesterday fell 1.2 percent to $92.81, the lowest close since Nov. 2. Prices are down 5.8 percent this year.
Brent oil for July settlement rose 32 cents to $110.07 a barrel on the London-based ICE Futures Europe exchange. The contract traded earlier at $109.01, marking the first drop in front-month Brent futures to less than $110 since Jan. 25. The June contract expired yesterday, falling 53 cents to $111.71. The European benchmark contract was at a premium to West Texas Intermediate of $15.98.
Technical Indicators
Oil advanced in New York after reaching technical support at $92.75 a barrel, according to data compiled by Bloomberg. On the daily chart, that’s the 50 percent Fibonacci retracement of the rise from October’s intraday low of $74.95 to the March high of $110.55 and is where futures reversed a decline in December.
Crude’s 14-day relative strength index has been below 30 for the past week, signaling further losses may not be sustainable. Buy orders tend to be clustered near chart-support levels. The RSI was at 26 today.
Japan’s economic growth in the last quarter was forecast to be 3.5 percent, based on the median estimate of 27 economists in a Bloomberg News survey. Singapore’s non-oil domestic exports increased 8.3 percent in April, compared with a median estimate of 5.9 percent in a separate survey.
Oil has fallen this week as Greece failed to agree on a coalition government following May 6 elections, raising concern that Europe’s debt crisis will worsen and derail the global economic recovery. The European Central Bank said yesterday it will temporarily stop lending to some Greek banks to limit its risk. The country announced a caretaker administration and will probably hold new elections next month.
Seaway Reversal
Prices dropped yesterday after U.S. stockpiles rose to the highest level since 1990 and a report signaled the nation may release emergency supplies. Crude inventories climbed 2.1 million barrels last week to 381.6 million, data from the Energy Department showed.
The U.S. has called on other Group of Eight nations to prepare to release strategic oil reserves because of the full implementation of the European Union’s ban on imports from Iran starting July, the Kyodo news service reported, citing unidentified officials familiar with Japan-U.S. ties.
Enbridge and Enterprise are scheduled to reverse the Seaway pipeline today, according to an April filing with federal regulators. A rise in Canadian and Midwest U.S. oil production, and limited transportation out of the Cushing storage hub, have created a supply glut.
Mainline Capacity
“Oil inventories being built up in the Midwest, with nowhere to go, will start to be relieved because of the pipeline,” Victor Shum, managing director at consultant Purvin and Gertz Inc. in Singapore. “The recent moderation in oil prices may be temporary, global oil demand is likely to strengthen in the summer.”
Enbridge, the biggest carrier of Canadian oil to the U.S., said yesterday it will spend about $3 billion to boost the capacity of its mainline system and give western producers access to refiners in the Midwest and Quebec.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
