West Texas Intermediate crude rose as U.S. equities surged after data showed U.S. factory orders exceeded forecasts, signaling increasing economic growth and fuel demand.
Futures advanced for the fifth time in six days as the Commerce Department reported that orders placed with U.S. factories gained the most in five months in February, boosted by a pickup in demand for motor vehicles and commercial aircraft. An Energy Information Administration report tomorrow will probably show stockpiles climbed by 2.05 million barrels last week, according to the median of 12 analyst responses in a Bloomberg survey.
“The U.S. economy is improving and that’s showing up in the strong move in equities,” said John Kilduff, a partner at Again Capital LLC, a New York-based energy hedge fund. “Oil is also getting some support from the improving economic outlook.”
WTI crude oil for May delivery climbed 12 cents to settle at $97.19 a barrel on the New York Mercantile Exchange. The contract dropped as much as 1.2 percent to $95.91 today. The volume of all futures traded was 2.9 percent below the 100-day average for the time of day at 3:40 p.m.
Brent oil for May settlement decreased 39 cents, or 0.4 percent, to end the session at $110.69 a barrel on the London- based ICE Futures Europe exchange. The volume of all futures traded was 18 percent higher than the 100-day average.
The 3 percent gain in bookings for U.S. manufactured goods followed a revised 1 percent decline in January, according to the Commerce Department. The median forecast of 64 economists in a Bloomberg survey called for a 2.9 percent rise. The advance was led by a 5.6 percent surge in demand for durable goods.
The Standard & Poor’s 500 Index climbed 0.3 percent and the Dow Jones Industrial Average gained 0.4 percent at 3:40 p.m.
Brent traded at a $13.50 premium to WTI futures, compared with $14.01 yesterday and $12.79 March 28. The European benchmark’s premium widened yesterday as the shutdown of Exxon Mobil Corp.’s Pegasus pipeline system, which moves oil to Gulf Coast refineries from the central U.S., threatened to exacerbate a regional glut.
“There’s less concern about the impact of the pipeline closure today and as a result the Brent-WTI spread is narrowing,” Kilduff said.
Exxon is developing a plan to repair a leak that shut the 96,000 barrel-a-day pipeline system after a spill was discovered March 29 in Arkansas. The line runs 940 miles (1,512 kilometers) from Patoka, Illinois, to Nederland, Texas, and serves refineries around Port Arthur and Beaumont on the Gulf Coast near Texas’ border with Louisiana.
Tomorrow’s EIA report will probably show that U.S. gasoline stockpiles slid 1 million barrels last week, according to the median estimate in the Bloomberg survey. Supplies of distillate fuel, a category that includes heating oil and diesel, fell 1.1 million barrels, the survey showed.
“We’re going to be marking time for the most part until the petroleum inventory data is released,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
The industry-funded American Petroleum Institute is scheduled to release separate inventory data at 4:30 p.m. Washington time today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical unit, for its weekly survey.
“There’s no doubt that there’s oil aplenty in the U.S.,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The rise in U.S. oil output is changing the world energy picture dramatically. The only problem we have is shipping it from place to place, which is why we’re paying attention to the pipeline closure.”
Implied volatility for at-the-money WTI crude options expiring in May was 17.3 percent, down from 17.5 percent yesterday. The figure has slipped from 24.7 percent on Feb. 21.
Electronic trading volume on the Nymex was 441,270 contracts as of 3:40 p.m. It totaled 457,858 contracts yesterday, 19 percent below the three-month average. Open interest was 1.73 million contracts.