Oil Gains in New York as U.S. Economic Data Signals Slump Was Exaggerated

Oil rose in New York, rebounding from the biggest weekly decline since 2008 as signs of an improving economy in the U.S., the world’s largest crude consumer, stoked speculation last week’s slump was exaggerated.

Futures climbed as much as 1.9 percent today, snapping a five-day losing streak, after Labor Department data on May 6 showed payrolls expanded more than forecast. The global economy isn’t weak enough to justify a freefall in prices, Qatar Oil Minister Mohammed bin Saleh al-Sada said yesterday. Oil’s 14-day relative strength index, a measure of how rapidly prices are rising or falling, dropped to 29.2 on May 6. A reading below 30 typically indicates prices may rebound.

“You’d expect some sort of reaction after the reasonable employment data,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted oil will average $100 a barrel this year. “I’d expect a nervous recovery after the move from $113 down to $97. We may see some strength the next couple of days.”

Crude for June delivery increased as much as $1.81 to $98.99 a barrel in electronic trading on the New York Mercantile Exchange. It was at $98.75 at 12:22 p.m. Singapore time. On May 6, the contract fell $2.62, or 2.6 percent, to $97.18, the lowest settlement since March 15.

Oil slumped 15 percent last week, the biggest drop since December 2008. Prices are up 29 in the past year.

Brent crude for June settlement on the London-based ICE Futures Europe exchange rose as much as $1.57, or 1.4 percent, to $110.70 a barrel.
Bullish Bets

Hedge funds were caught with bullish bets near record highs last week as oil in New York plunged.

Large speculators reduced net-long positions by 2.4 percent to 293,823 futures and options in the seven days to May 3, according to the U.S. Commodity Futures Trading Commission’s weekly Commitments of Traders report. That’s still within 5.7 percent of an all-time high in March.

U.S. retail sales climbed in April, bolstering evidence employment gains are allowing Americans to weather higher fuel costs, according to economists surveyed by Bloomberg News before a Commerce Department report on May 12. Purchases probably gained 0.6 percent, based on the median forecast.

A stable oil price is a goal of the Organization of Petroleum Exporting Countries, Qatar’s al-Sada said yesterday. Markets are well supplied and it’s too early to say whether OPEC will decide to pump more crude at its next meeting on June 8, he said. The 12-member group is responsible for 40 percent of the world’s oil supply.
Brent Crude

Brent, the benchmark for Europe and Africa, has rallied 17 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and disrupted exports from Libya, an OPEC member.

Security forces yesterday beat back protests and fired on demonstrators in Syria and Yemen as Egypt’s justice minister vowed to restore order with an “iron fist,” after sectarian clashes in Cairo left 12 people dead.

“Some of the tightness that was expected around the supply side seems to have abated,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said in an interview with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.”

The regional conflict “seems to be relatively well contained,” said Westmore, who predicted oil will average $113 a barrel in the third quarter.