Oil rebounded after the biggest decline in two months as U.S. service industries expanded at a better-than-expected pace in January, signaling growth in 90 percent of the U.S. economy and stronger demand for crude.
Oil advanced 0.5 percent as the Institute for Supply Management’s index of U.S. non-manufacturing businesses reached 55.2, beating the estimate of 55 in a Bloomberg survey of economists. The spread between crude in New York and London widened to the most in almost six weeks. The 50-day moving average of front-month New York futures traded above the 200-day average for a third day, a sign prices may extend their rally.
“We’ve had a good set of economic indicators,” saidMichael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We are in a bull market. It’s a combination of things that are all pushing up oil prices.”
West Texas Intermediate crude oil for March delivery rose 47 cents to settle at $96.64 a barrel on the New York Mercantile Exchange. Prices dropped the most since Dec. 6 yesterday. Trading was 10 percent above the 100-day average at 4:32 p.m. Prices have gained 5.2 percent this year.
Prices were little changed after the American Petroleum Institute reported oil inventories increased 3.63 million barrels last week to 371.8 million. Oil was up 48 cents, or 0.5 percent, at $96.65 at 4:31 p.m. in electronic trading. The contract traded at $96.64 before the report was released.
Brent oil for March settlement climbed 92 cents, or 0.8 percent, to end the session at $116.52 on the London-based ICE Futures Europe exchange. Trading volume was 39 percent above the 100-day average.
The European benchmark grade’s premium to WTI strengthened for a fifth day to $19.88, the widest spread since Dec. 27 based on settlement prices. It was $19.43 yesterday. The gap has grown since Enterprise Product Partners LP (EPD) said Jan. 31 that capacity on the Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, will have limitations until late 2013.
Services in the U.S. expanded at about the same pace in January as in December, when the index reached a 10-month high of 55.7, the Tempe, Arizona-based ISM reported. Readings above 50 indicate expansion.
Oil futures rose to an intraday high of $97.07 a barrel after European services output shrank less than initially estimated last month. The European services index rose to 48.6 in January, above an initial estimate of 48.3, according to London-based Markit Economics. The gauge has shown a contraction for 12 months.