West Texas Intermediate crude gained the most in almost six months as the number of Americans filing applications for unemployment benefits slipped and the European Central Bank reduced interest rates to a record low.
Oil climbed for the first time in three days after the government said jobless claims unexpectedly fell to the least in five years last week. ECB policy makers cut the main refinancing rate to 0.5% from 0.75%. WTI extended gains as natural gas tumbled, forcing traders to liquidate bets that oil prices would drop to meet cash demand, said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.
“The jobless claims and the ECB rate cut are providing support to the oil market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The markets continue to go back and forth on changing economic perceptions.”
WTI for June delivery rose $2.96, or 3.3%, to settle at $93.99 a barrel on the New York Mercantile Exchange, the biggest one-day increase since Nov. 6. The volume of all futures traded was 19% above the 100-day average for the time of day.
Brent for June settlement gained $2.90, or 2.9%, to $102.85 a barrel on the London-based ICE Futures Europe exchange. Volume was 42% above the 100-day average. Brent’s premium to WTI shrank to $8.86 a barrel, the least based on settlement prices since Dec. 30, 2011.
The U.S. jobless claims fell 18,000 to 324,000 in the week ended April 27, the fewest since January 2008, a month after the last recession started, the Labor Department reported today in Washington. Economists surveyed by Bloomberg forecast 345,000 claims.
“The U.S. economy is probably not as bad as people thought, and with any luck we’ll see other indicators become more bullish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Futures tumbled 3.7% in the previous two sessions amid signs of a slowdown in economic growth in the U.S. and China and as U.S. oil inventories reached an 82-year high.
“These moves are exaggerated and just show what happens with increased computerized trading,” said McGillian. “Over the next few months we should see a headline driven market with big moves.”
The Labor Department will release April employment figures tomorrow. Economists surveyed by Bloomberg forecast the jobs market made some headway last month, with payrolls growing by 140,000 after a gain of 88,000 a month earlier. The unemployment rate probably held at a four-year low of 7.6%, the survey showed.
The Standard & Poor’s 500 Index increased as much as 1% on the ECB rate cut and the jobless claims.
“The petroleum markets are tracking moderately higher in sympathy with rising equity prices,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York, in an e-mail. “Friday’s U.S. employment report for April will be the next significant macroeconomic data point.”
ECB President Mario Draghi signaled that officials may take the unprecedented step of charging banks to park excess cash with the ECB overnight and that another cut in the main rate is possible.
“The ECB rate cut certainly has an effect on asset prices and in the longer term on oil demand,” Lynch said.
The ECB’s move came after the Federal Reserve said yesterday that it will keep buying bonds at a monthly pace of $85 billion. The U.S. central bank said it’s “prepared to increase or reduce the pace of its purchases.”
Crude futures advanced as natural gas dropped 7%, the most in nine months, after a government report showed that U.S. gas stockpiles expanded by more than forecast.
“We are getting a really crazy selloff in natural gas, so you might have some positions being liquidated in WTI to cover margin in gas,” Schork said.
June natural gas slid 30.1 cents to settle at $4.025 per million British thermal units.
“There is an unwinding of the long-natural-gas, short- crude trade,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “People are de-leveraging out of gas and buying crude.”
Implied volatility for at-the-money WTI options expiring in June was 23.6%, compared with yesterday’s 25.9%, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 575,649 contracts as of 3:27 p.m. It totaled 736,155 contracts yesterday, 26% above the three-month average. Open interest was 1.75 million contracts.