Oil Rises Most in Three Weeks After Bernanke Jobs Comments on Dollar Weakens
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Oil Rises Most in Three Weeks After Bernanke Jobs Comments on Dollar Weakens
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Oil rose the most in three weeks as the dollar fell against the euro after Federal Reserve Chairman Ben S. Bernanke said the 8.3 percent rate of unemployment in January understates weakness in the U.S. labor market.
Futures increased 1.5 percent as the currency dropped on Bernanke’s comments and signs that Greece is near a debt agreement. West Texas Intermediate crude advanced more than Brent in London, reducing the European benchmark’s premium over New York oil for the first time in nine days.
“Bernanke made some pretty bearish statements and the dollar tanked,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “Once the dollar dropped you saw WTI rebound.”
Oil for March delivery rose $1.50 to settle at $98.41 a barrel on the New York Mercantile Exchange, the biggest one-day gain since Jan. 17. Prices have fallen 42 cents this year.
Brent oil for March settlement increased 30 cents, or 0.3 percent, to end the session at $116.23 a barrel on the London- based ICE Futures Europe exchange. Today’s close was the highest since Aug. 2.
Oil advanced after the settlement, reaching $98.77 a barrel at 4:48 p.m. after the American Petroleum Institute said U.S. oil inventories fell 4.53 million barrels last week.
The dollar fell to the lowest level against the euro since Dec. 12 after Bernanke told the Senate Budget Committee that the U.S. has a long way to go before the jobs market operates “normally.”
Commodities rose to a five-month high on his remarks. The Standard & Poor’s GSCI Index of 24 raw materials increased 0.7 percent, led by oil, aluminum and silver.
U.S. Economy
“It’s all about Bernanke’s testimony as we are seeing the euro gaining against the dollar after his talk,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.
The euro also strengthened as Greece’s government and international creditors are working on the final draft of an agreement on budget and structural measures needed to free up a second aid package. The 17-nation currency increased as much as 1.1 percent.
“At this particular moment it looks like maybe there will be a deal in Greece,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
The spread between oil in New York and Brent in London narrowed to $17.82 from $19.02 yesterday. The price difference between the two benchmark grades widened to $20.70 a barrel in intraday trading today, the highest level since October.
WTI-Brent Spread
“We finally start to see a retracement in the Brent-WTI spread,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “It went above $20 this morning and all of a sudden there is a correction in the spread.”
The differential narrowed to as small as $7.93 on Dec. 27 after Enterprise Products Partners LP and Enbridge Inc. announced Nov. 16 that they will reverse the 500-mile Seaway pipeline in June to ship oil from Cushing, Oklahoma, the delivery point of Nymex futures, to the Gulf Coast. The spread has grown since then.
“The WTI-Brent spread had widened too much at the front recently,” said David Greely, head of energy research at Goldman Sachs Group Inc. in New York. “The Seaway pipeline is still scheduled to reverse in June, and the spread is too wide for June, July and the following months when the pipeline should be open.”
U.S. Price Forecast
The U.S. Energy Department increased its crude-oil price projection for 2012 to $100.40 a barrel this year from $100.25 a barrel in January today in its monthly Short-Term Energy Outlook. It also trimmed global demand and non-OPEC production forecasts.
Oil fell as much as 1.1 percent earlier on speculation that U.S. crude inventories climbed to the highest level in more than four months. Stockpiles increased 2.5 million barrels, or 0.7 percent, to 341.4 million in the week ended Feb. 3, according to the median estimate of 10 analysts surveyed by Bloomberg News before an Energy Department report tomorrow.
Crude supplies swelled as refineries operated at 81.4 percent of capacity last week, according to the survey.
Inventories rose 4.18 million barrels to 338.9 million in the week ended Jan. 27, the Energy Department reported on Feb. 1. The refinery utilization rate fell to 81.8 percent in the same week, the second lowest for this time of year since 1992.
Oil volume in electronic trading on the Nymex was 1.07 million contracts as of 4:40 p.m. in New York, the highest level, excluding floor trading, since Nov. 16, the day the Seaway pipeline reversal was announced.
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