Crude Oil Climbs as Stock Market Advances, Dollar Weakens

By Mark Shenk and Samantha Zee

April 22 (Bloomberg) -- Crude oil climbed for a second day, following gains in U.S. stocks, after Treasury Secretary Timothy Geithner said the “vast majority” of the nation’s banks have more capital than needed.

Crude futures rose as financial shares led U.S. equities higher. Energy prices also increased as the euro climbed against the dollar, bolstering the appeal of commodities as an alternative investment.

“The equity markets are higher and the dollar is giving back some of its recent gains,” Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, said yesterday. “None of this is particularly germane to the oil business, but it’s giving the market a lift.”

Crude oil for June delivery rose as much as 38 cents, or 0.8 percent, to $48.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $48.76 at 9:20 a.m. Sydney time.

The May contract, which expired yesterday, was less expensive than the following months, allowing buyers to profit from storing oil. Crude oil for May delivery rose 63 cents to settle at $46.51 a barrel, after earlier plunging as much as 4.5 percent.

“Crude oil is in a rather interesting area right now,” said Stephen Schork, president of Schork Group Inc. of Villanova, Pennsylvania. Yesterday’s contract expiration was behind “a lot of the volatility we’re seeing,” he said.

Stocks Gain

The Standard & Poor’s 500 Index rose 2.1 percent to 850.08 yesterday after dropping as much as 0.7 percent earlier. The Dow Jones Industrial Average increased 1.6 percent to 7,969.56.

An Energy Department report today will probably show U.S. crude oil supplies climbed 2.5 million barrels last week, according to the median of 15 responses in a Bloomberg News survey.

Inventories rose 5.67 million barrels to 366.7 million in the week ended April 10, the highest since 1990 and 13 percent greater than the five-year average for the period.

“We’ve been stuck between the mid-$50s and the mid- $40s,” Schork said. “Prices may move to the low $40s” if stockpiles rise and markets react, he said.

The department’s inventory report is due at 10:30 a.m. New York time today.

API Report

The industry-funded American Petroleum Institute reported after floor trading ended yesterday that oil supplies fell for the first time since the week ended March 6. Stockpiles declined 1.01 million barrels to 370.2 million last week, API said. The report was released at 4:30 p.m. in Washington.

“Not much of a draw, but it breaks the seemingly relentless pattern of crude stock builds experienced since early March,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington.

API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The Energy Department requires reports to be filed for its weekly supply survey.

Gasoline stockpiles probably dropped 700,000 barrels from 216.5 million the prior week, according to the Bloomberg survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 1 million barrels from 139.6 million.

Production Cuts

Iran, the second-largest producer among the Organization of Petroleum Exporting Countries, may back further output cuts when the group meets May 28, the country’s OPEC governor, Mohammad Ali Khatibi, said yesterday, according to a report by the Islamic Republic News Agency.

The current oil price near $50 a barrel is “appropriate in the current global economic climate,” Khatibi said. In the longer term, Iran wants prices around $75 to $80 to support the country’s investment in its oil and gas industry.

OPEC agreed at three meetings last year that the 11 members with quotas would cut output by 4.2 million barrels a day to 24.845 million. The members with production targets, all except Iraq, pumped 25.567 million barrels a day in March, according to a monthly report the organization released April 15.

“OPEC has probably reached a point where they can’t afford to make further cuts,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. “Given the lack of cooperation, they will probably sit back and hope that the lower oil prices will act as a stimulus and bolster demand.”

Petroleos Mexicanos, the state-owned oil company, said output fell 6.6 percent to 2.65 million barrels a day in March compared with a year earlier. Mexico was the second- biggest source of U.S. crude oil imports during the first two months of the year, according to the U.S. Energy Department.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Samantha Zee in San Francisco at szee@bloomberg.net.