Oil rose in New York, trimming its second weekly decline in three, as investors speculated yesterday’s slump was exaggerated amid signs fuel demand may be supported in the world’s two biggest crude-consuming nations. Crude for July delivery climbed as much as 0.6 percent, recovering from a 1.6 percent drop yesterday. U.S. jobless claims fell by 29,000, more than forecast, in the week ended May 14, according to the Labor Department. China’s diesel demand may climb as factories turn to the fuel this summer for power generation amid electricity rationing. “The market is long term bullish and we’ve got a temporary correction so traders are seeing this as a buying opportunity,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The potential diesel imports to China will be bullish to the overall oil market.” Crude for July delivery, the most-active contract, increased as much as 57 cents to $99.50 a barrel in electronic trading on the New York Mercantile Exchange, and was at $99.28 at 12:13 p.m. Singapore time. The June contract, which expires today, gained 52 cents to $98.96. Futures are 0.7 percent lower this week and up 46 percent the past year. Brent crude for July settlement rose 11 cents, or 0.1 percent, to $111.53 a barrel on the London-based ICE Futures Europe exchange. It slipped 88 cents to $111.42 a barrel yesterday, the lowest settlement since May 17. A gauge of the outlook for the U.S. economy for next three to six months slid for the first time since June and sales of existing U.S. homes unexpectedly declined. “The market is still divided about the economic numbers out of the U.S.,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted oil will average $100 this year. “The data wasn’t that crash-hot either way.” Oil has “been trying to consolidate all week,” he said. China Diesel The longest decline in the profit from producing diesel in Asia since August 2008 may be ending as China’s worst energy shortage in seven years forces factories to rely on the fuel to power generators. The return from processing crude into diesel, known as the crack spread, is likely to stay at about $18 a barrel through the summer after tumbling 24 percent over the past six weeks, according to the median estimate of four traders and refiners surveyed by Bloomberg News. The spread was $17.38 yesterday. China is rationing electricity as utilities cut output because of rising coal costs and government caps on prices at the same time that the lowest water levels since 2003 on the Yangtze River, site of the world’s biggest hydropower dam, curb supplies. Diesel demand in China may increase 6.5 percent this year to 3.35 million barrels a day as manufacturers use the fuel in generators, according to the International Energy Agency. Options Cheap Crude oil may rise next week as economic growth bolsters fuel demand in the U.S., the biggest oil-consuming country, a Bloomberg News survey showed. Eighteen of 43 analysts, or 42 percent, forecast oil will increase through May 27. Fifteen respondents, or 35 percent, predicted prices will decline and 10 projected little change. Implied volatility for at-the-money options expiring in July, a measure of expected price swings in futures and a gauge of options prices, was 33.4 percent as of 5 p.m. in New York, down from 35.1 percent yesterday. The most-active oil options were July $120 calls, which slipped 14 cents to 18 cents a barrel. July $110 calls, the next-most active option, retreated 39 cents to 67 cents a barrel. Open interest was highest for December 2012 $80 puts, a bet that prices will fall. Economic Data “We think crude oil volatility is on the cheap side,” Simon Ho, chief investment officer for Sydney-based asset managers Triple 3 Partners, said in a Bloomberg Television interview. “So investors looking to have some sort of play in oil whether on the long or short side, we would suggest using long net options positions. The story on commodities is pretty compelling” Fewer Americans than forecast filed applications for unemployment benefits last week, making it more likely that a surge in April was caused by temporary events rather than a deterioration in the labor market. OPEC will raise exports by the most since mid-February this month to meet growing demand from Asia, according to tanker tracker Oil Movements. The Organization of Petroleum Exporting Countries will ship 22.91 million barrels a day in the four weeks to June 4, up 1.9 percent from 22.49 million in the period ended May 7, the consultant said yesterday in a report. The International Energy Agency said yesterday that oil producers need to increase supplies as prices are threatening the global economic recovery. Alberta Fire Firefighters in northern Alberta, Canada, may begin to gain the upper hand over wildfires that shut a pipeline carrying crude from oil-sands projects, Alberta Sustainable Resource Development said. The fires forced Plains All American Pipeline LP to stop cleanup work from an earlier oil spill and shut down its Rainbow pipeline system on May 15. Cenovus Energy Inc. has shut oil production at its Pelican Lake project because of the pipeline closure, Rhona DelFrari, a spokeswoman, said yesterday. The Conference Board’s index of leading indicators fell 0.3 percent in April, the New York- based group said yesterday. The measure was depressed by a pickup in jobless claims that reflected temporary setbacks including auto-plant shutdowns caused by the disaster in Japan. The European benchmark traded at a premium of $12.25 a barrel to U.S. futures, compared with $12.49 yesterday. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing. The spread averaged 76 cents last year. To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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