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Crude Advances in New York on Outlook for U.S. Economic Growth

29 May 2012

Oil traded near the highest in a week in New York as speculation that economic growth will boost fuel demand in the U.S. countered concern that Europe’s debt crisis will worsen.

Futures advanced as much as 1.2 percent from the close on May 25. U.S. consumer confidence probably gained in May and job growth may have picked up, according to surveys by Bloomberg News before reports this week. The U.S. Memorial Day holiday yesterday marked the start of the nation’s peak driving period.

“The U.S. situation is hopeful, with demand numbers improving lately as we kick off the summer driving season,”said Andrey Kryuchenkov, an analyst at VTB Capital in London, who predicts oil will trade from $84 and $96 a barrel next month. “But at the same time inventories are high, so we’d really need refinery runs to hold up early summer to work through the excess crude.”

Crude for July delivery climbed as much as $1.13 to $91.99 a barrel in electronic trading on the New York Mercantile Exchange, the highest since May 22, and was at $91.23 at 12:42 p.m. London time. Floor trading was closed yesterday for the U.S. Memorial Day holiday and transactions will be booked with today’s trades for settlement purposes. Front-month prices are down 7.7 percent this year.

Brent oil for July settlement was at $106.94 a barrel, down 17 cents, on the London-based ICE Futures Europe exchange. Prices have fallen 10 percent in May. The European benchmark contract’s premium to West Texas Intermediate was at $15.72, compared with $16.12 yesterday.

Technical Support

Oil’s slump this month may be stalling as futures trade close to $90 a barrel, according to technical analysis by Auerbach Grayson & Co.

West Texas Intermediate oil traded in New York fell to $89.28 on May 23, the weakest intraday level since November, from this month’s high of $106.43 on May 1. The decline may halt near the psychological $90 level and the 38.2 percent one-year Fibonacci retracement level of $88.55, according to Richard Ross, an analyst at the New York brokerage.

“The second half of the year should be stronger, so we’d look for buying opportunities if our macro indicators stabilize,” said Guy Wolf, a macro strategist at Marex Spectron Group Ltd., a London-based commodities broker. “At the moment, we’re in a ‘bad-news vacuum’ and that’s helping things stabilize. The underlying environment is still poor, but markets had become quite oversold in the short term.”

U.S. Economy

The New York-based Conference Board’s gauge of consumer confidence probably rose to 69.5 in May from 69.2 the previous month, according to a Bloomberg survey before a report tomorrow. U.S. payrolls increased by 150,000 workers after a gain of 115,000 in April that was the lowest in six months, according to the median forecast of 70 economists in a separate survey before Labor Department figures on June 1.

“There’s little green shoots of optimism,” Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity-markets newsletter in Sydney, said by phone today.“We’re going to get a robust story out of the U.S. We’re not out of hot water with Europe.”

Libya’s state-owned Arabian Gulf Oil Co.’s crude output may rise to 450,000 barrels a day by the end of the year, surpassing pre-conflict levels, International Oil Daily reported, citing unidentified company officials.

The company, known as Agoco, is producing about 400,000 barrels a day, IOD said. The additional output will come from the company’s Messla oilfield, according to the newsletter.

Futures in New York have slipped 13 percent this month amid concern that Europe’s debt crisis will derail the global economic recovery.

Greece, responsible for 0.4 percent of the world economy, now poses a threat to international prosperity as investors raise bets its days of using the euro are numbered.

A Greek departure from the currency would inflict“collateral damage,” says Pacific Investment Management Co.’s Richard Clarida, a view echoed by economists from Bank of America Merrill Lynch and JPMorgan Chase & Co.