Crude Oil Rises as U.S. Equity Rally Spurs Demand Expectations

By Christian Schmollinger

April 16 (Bloomberg) -- Crude oil rose for the first time in a week as equities in the U.S., the world’s biggest oil user, rallied and the Federal Reserve said some of the country’s biggest regional economies slowed the pace of their decline.

Oil gained as much as 1.2 percent after stocks climbed in the last hour of trading yesterday. Fed districts reporting a slower economic decline or signs of stabilization include San Francisco, the largest district, New York, Chicago, Kansas City and Dallas, the Fed said in its Beige Book business survey.

“The sentiment is becoming more bullish for all commodities, perhaps prematurely but that is the market,” said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. “With the speculation that things aren’t getting as bad as they were previously, it’s providing support to commodity prices.”

Crude oil for May delivery rose as much as $1.05, or 2.1 percent, to $50.30 a barrel on the New York Mercantile Exchange. It was at $50.08 a barrel at 9:52 a.m. Singapore time. Prices are up 12 percent so far this year.

Yesterday, oil fell 16 cents, or 0.3 percent, to $49.25 a barrel, the lowest settlement on the Nymex since April 7, after a government report showed that U.S. stockpiles climbed to the highest level in almost 19 years as demand dropped.

The Dow Jones Industrial Average jumped 109.44 points, or 1.4 percent, to 8,029.62 yesterday.

The trend of higher equity prices continued into Asian trading. The Nikkei 225 Stock Average climbed 1 percent, to 8,832.99 as of 9:05 a.m. in Tokyo, breaking a three-day slide. The broader Topix index rose 10.13, or 1.2 percent, to 845.38.

Commodities, Inventories Gain

Other commodities also gained on the climb in stock prices. Copper climbed for a sixth day, poised for its longest rally since July 2006. Three-month delivery copper on the London Metal Exchange rose 1 percent to $4,869.25 a ton.

Gains in oil inventories have limited future prices to between $43.62 and $54.66 a barrel over the past month.

Oil inventories rose 5.67 million barrels to 366.7 million last week, the highest since September 1990, the Energy Department said yesterday. Supplies were forecast to increase by 1.75 million barrels, according to the median of 14 analyst estimates in a Bloomberg News survey.

Stockpiles at Cushing, Oklahoma, where New York-traded West Texas Intermediate crude is delivered, fell 742,000 barrels to 29.2 million last week, the lowest since the week ended Dec. 26.

Gasoline stockpiles declined 944,000 barrels to 216.5 million in the week ended April 10, according to the department. Distillate fuels, a category that includes heating oil and diesel, fell 1.17 million barrels to 139.6 million.

Demand Slows

Daily fuel demand averaged over the past four weeks was 18.7 million barrels, down 5.2 percent from a year earlier, according to the department.

Refineries operated at 80.4 percent of capacity, down 1.5 percentage points from the week before, the lowest since the week ended Sept. 26, when units were shut in the aftermath of Hurricanes Gustav and Ike, the department said. A gain of 0.1 percentage point was forecast.

The International Energy Agency cut its 2009 oil-demand forecast last week for an eighth month, reducing its outlook by 1 million barrels a day to 83.4 million barrels.

Brent crude oil for June settlement rose as much as $1.59, or 3.1 percent, to $53.38 a barrel on London’s ICE Futures Europe exchange. It was at $53.33 a barrel at 9:16 a.m. Singapore time.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net