West Texas Intermediate crude rose from a four-month low on signals that recent losses were exaggerated and as Spain sold more debt than planned.
Futures in New York climbed 1.2% and Brent oil in London rebounded from a nine-month low. The WTI 14-day relative- strength index slid below 30 yesterday, a sign prices may have fallen too far. Commodities advanced with the euro as Spain sold 10-year debt at the lowest yield since September 2010 and borrowing costs for governments across Europe declined.
“Investors are looking at these prices as good value,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “We held above $85 and it now looks like the market will trade in a new $85-to-$100 range.”
WTI crude oil for May delivery rose $1.05 to settle at $87.73 a barrel on the New York Mercantile Exchange. It was the biggest gain since March 26. The contract fell to $85.61 earlier, the lowest intraday price since Dec. 11. The volume of all futures traded was 49% above the 100-day average as of 3:43 p.m.
Brent oil for June settlement advanced $1.44, or 1.5%, to end the session at $99.13 a barrel on the London- based ICE Futures Europe exchange. It was the first increase in six trading days. Brent touched $96.75, the lowest level since July 2. The volume of all futures traded today was 38% higher than the 100-day average.
WTI-Brent Spread
The front-month European benchmark grade settled at a premium of $11.13 to June WTI. The spread ended yesterday at $10.72, the narrowest closing level since Jan. 25, 2012.
WTI’s 14-day relative strength index fell to 27.33 yesterday, its lowest level since June. A reading of 30 or below typically indicates that a market has fallen excessively and is interpreted by traders as an opportunity to buy.
Spain sold 4.71 billion euros ($6.14 billion) of bonds, more than its maximum target of 4.5 billion euros. France sold five-year notes at a record-low rate, while Slovenia hired banks to organize meetings with investors a day after scooping up twice its target in a domestic offering.
The euro rose 0.2% against the dollar, bolstering the appeal of raw materials denominated in the U.S. currency as an investment. The Standard & Poor’s GSCI Index of 24 commodities was up 0.8%, the biggest increase since Dec. 26. Gains were led by natural gas, coffee and crude oil.
“The dollar is weaker, which is giving commodities a boost,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The market has sold off a great deal, which makes futures an attractive buy.”
Jobless Claims
U.S. claims for jobless benefits were little changed, signaling the labor market in the biggest oil-consuming nation is stabilizing. First-time U.S. unemployment claims climbed by 4,000 to 352,000 in the week ended April 13, the Labor Department said today.
“The success of the Spanish bond auction came as a relief,” said John Kilduff, a partner at Again Capital LLC, a New York energy hedge fund. “The U.S. jobless numbers stabilized, which is a positive signal.”
Futures retreated earlier as the index of U.S. leading indicators declined for the first time in seven months, a sign the world’s largest economy will cool. The Conference Board’s gauge of the outlook for the next three to six months fell 0.1% in March.
U.S. Stockpiles
U.S. crude supplies climbed to 388.9 million barrels in the week ended April 5, the highest level since July 1990, according to the Energy Information Administration. Inventories gained in April during the past 13 years, data from the EIA, Energy Department’s statistical arm, show. Stockpiles rise as refineries end seasonal maintenance programs, and prepare to boost output of gasoline for the summer months.
“Traders are taking a step back and trying to assess whether the move lower has run its course,” said Michael Wittner, the head of oil-market research at Societe Generale SA in New York. “We’ve already had a big drop in prices based on seasonal weakness of fundamentals.”
The Organization of Petroleum Exporting Countries has no plans for an emergency meeting, two OPEC delegates said, asking not to be identified because such discussions are private. An official at OPEC’s Vienna headquarters declined to comment when contacted by phone today. The group’s next scheduled meeting is on May 31.
Iranian Comments
Iranian Oil Minister Rostam Qasemi said yesterday that negotiations would be held with other OPEC members to hold an emergency meeting should prices drop below $100, without specifying which grade of oil, according to state-run Press TV.
“If oil were to fall further you would expect action from OPEC,” O’Grady said. “The Iranian statement makes clear that lower prices would prompt an emergency meeting.”
Implied volatility for at-the-money WTI options expiring in June was 25.4%, down from 28% yesterday.
Electronic trading volume on the Nymex was 702,990 contracts as of 3:45 p.m. It totaled 758,985 contracts yesterday, 29% above the three-month average. Open interest was 1.76 million contracts.
