CRUDE oil rose, heading for its second weekly gain, as advancing equity markets restored faith in the prospect of an economic recovery. Oil is set for a 5.7% gain this week. The Standard & Poor’s 500 Index has recovered 50% of the losses suffered after the September collapse of Lehman Brothers Holdings Inc. as a record number of companies beat analysts’ earnings estimates. German business confidence rose for a fourth month July. “If the global destruction of the economy has indeed bottomed then so should the oil markets,” said Olivier Jakob, managing director of consultants Petromatrix GmbH in Zug, Switzerland. “The green shoots in macro inputs have not been invalidated by earnings reports.” Crude oil for September delivery rose as much as 52 cents, or 0.8%, to $67.68 a barrel, on the New York Mercantile Exchange, trading for $67.51 in early trading in London. Oil has increasingly moved in tandem with benchmark stock indexes. The Dow Jones Industrial Average and US crude futures showed a correlation of 0.7 the past month, up from 0.06 in December, according to data compiled by Bloomberg. A correlation of 1 means the 2 moved in lockstep. “The surge in oil prices has certainly been driven by equities,” said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. “Some of the corporate earnings from the US were pretty good. There are still many to come.” Fuel consumption is still weak in the oil market, analysts said. US gasoline and distillate fuel inventories climbed for a sixth week, the Energy Department said July 22, signaling demand in the world’s largest energy user has been slow to rebound. “With oil prices close to $70 but products inventories in the US growing week on week, the risk of a price correction, as what we saw at the start of July, is growing,” Shum said. The Organization of Petroleum Exporting Countries will trim crude shipments by 1.7% in the four weeks ending Aug. 8, according to consultant Oil Movements, as refinery maintenance and faltering demand encourage members to implement supply cuts. OPEC, a 12-member group that pumps 40% of the world’s oil, will reduce seaborne exports in the four-week period to 22.39 million barrels a day from 22.78 million a day in the month ended July 11, the tanker-tracker said today. It’s the sixth consecutive drop reported in Oil Movements’ weekly reports. Brent crude for September settlement on London’s ICE Futures Europe exchange traded 27 cents higher at $69.52 a barrel in early trading in London.

Source