Oil Set for Biggest Weekly Gain Since March on Demand Optimism

(Bloomberg) -- Crude oil rose for a third day in New York, poised for the biggest weekly gain since March, on signs the global economy may be starting to recover.

Oil has advanced this week after reports showed fewer Americans filed claims for unemployment benefits, China’s manufacturing expanded for the first time in nine months and Australia’s jobless rate unexpectedly dropped last month.

“We are getting a bit of a consistent run of slightly better-than-expected economic data out of the U.S.,” said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. “Oil is maybe moving to a higher trading range, pushing through what looked like a key resistance level of $55 a barrel.”

Crude oil for June delivery rose as much as 68 cents, or 1.2 percent, to $57.39 a barrel in electronic trading on the New York Mercantile Exchange, and was at $57.27 at 11:20 a.m. Singapore time.

Oil is set to reach $62.65 a barrel “in the near future” and rally to $78 within six months as prices retrace the surge that started in 1998, according to technical analysis by PVM Oil Associates Ltd.

Yesterday, oil closed at $56.71, the highest settlement since Nov. 14. Prices have gained 7.6 percent this week, poised for the largest gain since the week ended March 20, and are up 28 percent this year.

Intraday High

Crude retreated from an intraday high of $58.57 yesterday as declines in U.S. financial, telephone and technology shares snuffed out an early rally. The S&P 500, which has risen 34 percent from a 12-year-low in March, slid 1.3 percent to 907.39. The Dow Jones Industrial Average decreased 1.2 percent to 8,409.85.

Prices earlier climbed on signs that U.S. refiners were ramping up production ahead of the peak driving demand season this summer. Processors increased their utilization by 2.7 percentage points to 85.3 percent last week, the Energy Department said in a May 6 report.

Refiners have more incentive to produce gasoline as the so- called crack spread, the profit from making motor fuel versus crude oil, has climbed 48 percent in the past two weeks to $13.64 a barrel today. It was $8.10 a barrel a year ago.

“With gasoline prices lower than last year, you’d think we’d have a more healthy driving season,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “You can argue that people will drive more because it’s a cheaper form of travel. Directionally we’re coming into a stronger demand season.”

Gasoline Gains

Gasoline for June delivery has risen to $1.6853 a gallon today at 10:48 Singapore time on the Nymex, the highest in six months. That’s 46 percent less than a year ago.

U.S. crude oil inventories rose 605,000 barrels to 375.3 million during the week ended May 1, the highest since 1990, said the Energy Department. Analysts forecast a gain of 2.5 million barrels. Gasoline supplies fell 167,000 barrels to 212.4 million, leaving stockpiles 2.8 percent above the five-year average for the period.

The number of Americans filing for unemployment insurance fell last week to the lowest level in three months. Initial jobless claims dropped by 34,000 to 601,000 in the week ended May 2, the fewest since late January, the Labor Department said in Washington yesterday.

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