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By Mark Shenk
May 8 (Bloomberg) -- Crude oil rose to the highest level since November after a report showed that the U.S. cut fewer jobs than forecast in April, a signal that the worst of the recession has passed and fuel demand may rebound.
Oil prices gained 10 percent this week as reports on U.S. home sales and manufacturing in China boosted optimism about the economy and after U.S. crude-oil supplies climbed less than forecast. Payrolls fell by 539,000, after a 699,000 loss in March, the Labor Department said today in Washington. A loss of 600,000 jobs was forecast in a Bloomberg News survey.
“Clearly, the better-than-expected jobs number supports the recent rally that’s been based on early signs of an economic recovery,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. “There is a natural skepticism that comes with this rally because the fundamentals of the oil market are so poor.”
Crude oil for June delivery rose $1.92, or 3.4 percent, to $58.63 a barrel at 2:59 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 11. Futures had the largest weekly gain since the week ended March 20.
Gasoline for June delivery climbed 4 cents, or 2.4 percent, to end the session at $1.7055 a gallon in New York, the highest since Oct. 20.
Equities increased after Federal Reserve Chairman Ben S. Bernanke said results of the government’s review of the banking industry’s health “should provide considerable comfort.”
The Standard & Poor’s 500 Index rose 2.4 percent to a four- month high of 929.23, capping its eighth weekly advance out of the past nine.
Weaker Dollar
Commodities also rose after the dollar dropped to a one- month low against the euro, bolstering the appeal of commodities as an alternative investment. The dollar lost 1.8 percent to $1.3632 versus the euro from $1.339 yesterday. It touched $1.3641, the weakest since March 25.
“As increasing risk appetite pushes equity markets higher, sentiment in the oil market has become quite optimistic,” said Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich. “The momentum could take us to $60, but we’re skeptical about the short-term fundamentals while U.S. demand remains so weak.”
U.S. crude supplies rose 605,000 barrels to 375.3 million last week, the highest since 1990, an Energy Department report on May 6 showed. A 2.5 million-barrel increase was forecast by analysts surveyed by Bloomberg News.
Fuel Consumption
Total daily fuel demand averaged 18.2 million barrels in the four weeks ended May 1, down 7.9 percent from a year earlier, the department said. It was the lowest consumption level for a four-week period since May 1999.
“Prices were divorced from the market fundamentals last year and we are seeing that again,” Kilduff said. “We will have to take out $60 and see if the market recalibrates to reflect the fundamentals.”
Refineries operated at 85.3 percent of capacity in the week ended May 1, up 2.7 percentage points from the week before and the highest since December, the Energy Department report showed. U.S. refiners usually increase operations in the weeks leading up to the peak gasoline-consumption period, which lasts from the Memorial Day weekend in late May to Labor Day in September.
“It appears that U.S. refiners are ending maintenance programs and are getting ready for the summer driving season,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “If that’s the case, crude oil demand will rise.”
Oil surged to a record $147.27 a barrel on July 11 on concern that rising demand in China and other emerging economies would outpace production.
Higher Range
“Oil is maybe moving to a higher trading range, pushing through what looked like a key resistance level of $55 a barrel,” according to technical analysis by PVM Oil Associates Ltd.
Futures climbed from a low of $10.35 a barrel in December 1998 to its peak in July. If oil reaches $62.65, that is equivalent to 38.2 percent of the 10-year rally, a milestone in Fibonacci technical analysis studies that suggests additional gains are likely, according to the London-based PVM.
OPEC agreed at three meetings last year that the 11 members with quotas would reduce output by 4.2 million barrels a day. The 11 cut production by 65,000 barrels a day to 25.255 million in April, 410,000 more than their target of 24.845 million, according to a Bloomberg News survey.
“OPEC compliance to the production targets has been pretty good,” Muller said. “If the economy starts to recover and OPEC continues to limit output, supplies may tighten later this year.”
Brent Rises
Brent crude oil for June settlement rose $1.67, or 3 percent, to end the session at $58.14 a barrel on London’s ICE Futures Europe exchange, the highest since Nov. 10.
Crude oil volume in electronic trading on the Nymex was 468,313 contracts as of 3:10 p.m. in New York. Volume totaled 738,367 contracts yesterday, 38 percent higher than the average over the past three months. Open interest was 1.2 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
