Oil Rises as Fewer Job Losses Signal Economy Is Stabilizing

By Mark Shenk

May 8 (Bloomberg) -- Crude oil rose, heading for the biggest weekly gain since March, after a report showed that the U.S. cut fewer jobs in April, a signal that the worst of the recession has passed and fuel consumption may rebound.

Oil prices are up 8.3 percent this week as reports on U.S. home sales and manufacturing in China boosted optimism about the economy and after U.S. crude-oil supplies rose less than forecast. Payrolls fell by 539,000, after a 699,000 loss in March, the Labor Department said today in Washington. A loss of 600,000 jobs was forecast in a Bloomberg News survey.

“Clearly, the better-than-expected jobs number supports the recent rally that’s been based on early signs of an economic recovery,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. “There is a natural skepticism that comes with this rally because the fundamentals of the oil market are so poor.”

Crude oil for June delivery rose 88 cents, or 1.6 percent, to $57.59 a barrel at 10:23 a.m. on the New York Mercantile Exchange. Futures are poised for the largest weekly gain since the week ended March 20. Yesterday, oil closed at $56.71, the highest settlement since Nov. 14.

Gasoline also rose after Exxon Mobil Corp. shut a unit that produces the fuel at its Baton Rouge, Louisiana, refinery, the second-largest in the U.S. Gasoline for June delivery climbed 1.31 cents, or 0.8 percent, to $1.6786 a gallon in New York.

U.S., European and Asian stocks increased after Federal Reserve Chairman Ben S. Bernanke said results of the government’s review of the banking industry’s health “should provide considerable comfort.”

Risk Appetite

“As increasing risk appetite pushes equity markets higher, sentiment in the oil market has become quite optimistic,” said Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich. “The momentum could take us to $60, but we’re skeptical about the short-term fundamentals while U.S. demand remains so weak.”

U.S. crude supplies rose 605,000 barrels to 375.3 million last week, the highest since 1990, an Energy Department report on May 6 showed. A 2.5 million-barrel increase was forecast by analysts surveyed by Bloomberg News.

Total daily fuel demand averaged 18.2 million barrels in the four weeks ended May 1, down 7.9 percent from a year earlier, the department said. It was the lowest consumption level for a four-week period since May 1999.

“Prices were divorced from the market fundamentals last year and we are seeing that again,” Kilduff said. “We will have to take out $60 and see if the market recalibrates to reflect the fundamentals.”

Oil surged to a record $147.27 a barrel on July 11 on concern that rising demand in China, India and other emerging economies would outpace production.

‘Consistent Run’

“Oil is maybe moving to a higher trading range, pushing through what looked like a key resistance level of $55 a barrel,” according to technical analysis by PVM Oil Associates Ltd.

Futures climbed from a low of $10.35 a barrel in December 1998 to its peak in July. If oil reaches $62.65, that is equivalent to 38.2 percent of the 10-year rally, a milestone in Fibonacci technical analysis studies that suggests additional gains are likely, according to the London-based PVM.

The Organization of Petroleum Exporting Countries is likely to extend its record production cut when the group meets in Vienna on May 28, Mehr news agency reported, citing Ali Khatibi, the Iran’s OPEC governor.

Brent crude oil for June settlement rose 78 cents, or 1.4 percent, to $57.25 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.