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Oil to One-Month High on U.S. Manufacturing Growth

01 May 2012

Oil climbed to a one-month high after U.S. manufacturing increased at the fastest pace in 10 months, signaling that economic growth will accelerate in the world’s biggest crude-consuming country.

Futures gained as much as 1.4 percent after the Institute for Supply Management’s factory index expanded in April, exceeding the most optimistic forecast in a Bloomberg survey of economists. Readings greater than 50 signal growth.

“We had really good ISM manufacturing data,” said Phil Streible, a Chicago-based commodities broker at RJO Futures.“It exceeded expectations and signaled growth in the U.S. That’s going to help oil demand.”

Crude oil for June delivery gained $1.16, or 1.1 percent, to $106.03 a barrel at 11:29 a.m. on the New York Mercantile Exchange. It touched $106.32, the highest intraday level since March 28. Prices climbed 1.8 percent in April and are up 7.3 percent this year.

Brent oil for June settlement gained 29 cents, or 0.2 percent, to $119.76 a barrel on the London-based ICE Futures Europe exchange. Brent futures’ premium to West Texas Intermediate traded on the Nymex narrowed to $13.73.

The ISM manufacturing index rose to 54.8 from March’s 53.4, the Tempe, Arizona-based group’s report showed. The median forecast in the Bloomberg survey called for a drop to 53, with a range from 52 to 54.

’First Surprise’

Futures dropped 4.1 percent to $104.87 yesterday from the March 1 intraday peak of $110.55 as tension between Iran and the West eased.

“The reaction to the ISM shows that the market is much more focused on the state of the economy than the situation with Iran,” said David Greely, head of energy research at Goldman Sachs Group Inc. in New York. “This is the first surprise we’ve had to the upside in quite a while.”

The ISM’s production index climbed to 61 in April, the highest level since March 2011, from 58.3. The new ordersmeasure increased to 58.2, the strongest since April 2011, from 54.5. The gauge of export orders rose to 59 from 54.

Recent regional reports indicate U.S. manufacturing, which accounts for about 12 percent of the total economy, is expanding less vigorously than last year. New York-area factories grew at the slowest pace in five months in April, and manufacturing in the Philadelphia region expanded at a slower pace last month, according to figures from the Federal Reserve.

The Labor Department will release April employment data on May 4. Payrolls climbed by 162,000 workers after a 120,000 gain in March, according to the median forecast of 64 economists surveyed by Bloomberg before the report. The jobless rate stayed at 8.2 percent, the survey showed.