Crude caps longest rally in nine months as jobless claims drop

WTI-Brent spread narrowest since January 2012

West Texas Intermediate crude capped the longest rally in nine months as fewer Americans filed first-time claims for unemployment insurance payments last week and the market breached key technical resistance.

Prices surged 2.4 percent as the Labor Department said applications for jobless benefits decreased to the lowest level since March 9. The gain accelerated after WTI broke through a Fibonacci level. The Obama administration said it has seen some evidence that the Syrian government has used the deadly chemical sarin in the country’s civil war. Brent oil’s premium to WTI narrowed to less than $10 for the first time since January 2012.

“The weekly jobless claims report is a big positive for the market and for the energy-demand outlook,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Syria is a geopolitical risk looming before us, and it’s helping raise the price a bit too.”

WTI for June delivery rose $2.21 to $93.64 a barrel on the New York Mercantile Exchange, the highest settlement since April 10. Prices increased 8 percent in the past six days, the longest consecutive winning streak since July. The volume of all futures traded was 3.7 percent above the 100-day average for the time of day at 3:16 p.m.

Brent for June settlement climbed $1.68, or 1.7 percent, to $103.41 a barrel on the London-based ICE Futures Europe exchange. Volume was 29 percent above the 100-day average.

WTI-Brent Spread

The European benchmark crude’s premium to WTI narrowed to $9.77 a barrel, the least since Jan. 3, 2012. It was $10.37 yesterday.

Jobless claims fell to 339,000 last week, below the lowest estimate of 340,000 in a Bloomberg survey of 49 economists. The Labor Department revised the previous week’s figure up to 355,000 from an initially reported 352,000.

“There’s been concern about the U.S. economy, but the jobless claims number makes the picture a little bit better,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Economic news is bullish today.”

The U.S., the world’s biggest oil consumer, accounted for 21 percent of global demand in 2011, according to BP Plc’s Statistical Review of World Energy.

Economic Indicators

“We did get a little bit of a bounce off the drop in jobless claims,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is basically following economic indicators for direction.”

The jobless number also sent U.S. stocks higher. The Standard & Poor’s 500 Index rose as much as 0.9 percent, heading for a fifth daily advance. The S&P’s GSCI Index of 24 commodities jumped up to 1.8 percent, led by metals, wheat and energy.

Futures broke through technical resistance at $91.14 a barrel yesterday, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. That’s the front-month’s 50 percent retracement level on a Fibonacci study tracking the rise to $98.24 on Jan. 30 from a low of $84.05 on Nov. 7. Prices then broke the 61.8 percent retracement level of $92.82.

“You have both the broad risk-on trade in the markets, along with technical factors at work with crude,” Yawger said. “From a technical standpoint, we should be higher.”

Chemical Weapons

The evidence that Syrian government forces have used the deadly chemicals is “not sufficient” to take action, Miguel E. Rodriguez, President Barack Obama’s legislative liaison to Congress, wrote in a letter to lawmakers dated today.

Israel shot down an unmanned Hezbollah aircraft that was approaching its Mediterranean coast, the second drone launched by the militant Lebanese group in less than a year, the Israeli army said in a statement. Hezbollah denied in an e-mailed statement that it sent a drone to Israel.

U.S. gasoline inventories fell 3.93 million barrels last week to 217.8 million, the biggest drop in a year, the Energy Information Administration, the Department of Energy’s statistical arm, said yesterday. Demand for gasoline jumped 4.4 percent to 8.75 million barrels a day, the most since November.

Gasoline for May delivery surged 6.44 cents, or 2.3 percent, to $2.8118 a gallon on the Nymex.

Futures’ advance was “supported by a renewed focus on Wednesday’s DOE report,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in an e-mail.

Implied volatility for at-the-money WTI options expiring in June was 20.8 percent, compared with yesterday’s 21.5 percent.

Electronic trading volume on the Nymex was 489,265 contracts as of 3:19 p.m. It totaled 497,695 contracts yesterday, 14 percent below the three-month average. Open interest was 1.73 million contracts.

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