Oil hits 11-week high above $79 on storm threat

By Robert Gibbons

NEW YORK (BestGrowthStock) – Oil jumped more than 3 percent to a 11-week high above $79 a barrel on Thursday as a potential tropical storm threatened energy installations in the Gulf of Mexico and strong earnings boosted investor sentiment.

Some companies operating in U.S. waters off the Gulf Coast pulled nonessential workers on forecasts a tropical depression off the Bahamas could become a storm over the next 12 hours.

Forecasts call for the storm to pass over key oil and natural gas production areas before making landfall in Louisiana or Texas in four days.

All of the weather models forecast the depression to skirt south of Florida and move northwest across the oil producing central Gulf of Mexico before hitting the coast of Louisiana or Texas.

U.S. crude oil for September delivery settled up $2.74, or 3.58 percent, at $79.30 a barrel, the highest settlement since May 5. Trading ranged from $76.16 to $79.42, highest intraday peak since prices reached $80.39 on May 6, and breaking through key resistance in afternoon activity.

“What matters is the June 28 high of $79.38 was bested by today’s peak, which breaks the series of lower highs,” said Mike Fitzpatrick, vice president at MF Global in New York.

London ICE Brent futures rose $2.45 to settle at $77.82 a barrel.

Further support came as major companies including UPS and 3M, reported strong revenues, easing investor concerns about future growth and boosting U.S. stocks (Read more about the stock market today. ). (.N: )

“You had the euro zone data and equities are very strong despite the jobless claims rising. We’ve not seen the dollar index (Read more about the global trade. ) getting pounded like this in a while,” said Addison Armstrong, analyst at Tradition Energy in Stamford, Connecticut.

“If we get a storm it could be setting up the market to make a run at $80.”

Data showed sales of previously owned U.S. homes hit a three-month low in June while new claims for jobless benefits surged last week, the latest indications the economic recovery remains tentative.

Thursday’s rally pushed oil prices back above two key technical resistance points for a second consecutive day: the 200-day moving, which was $77.62 on Thursday, and a trend line connecting several intraday peaks going back to the April 6. (Graphic: http://link.reuters.com/cyk98m )

Oil received an early lift when European purchasing managers’ indexes showed private sector business activity accelerated in July, surprising economists who had expected a slowdown.

“I think that this is a very good sign that we are not heading for a double-dip recession,” Dekabank analyst Sebastian Wanke told Reuters Insider. (Reuters Insider interview with Sebastian Wanke: http://link.reuters.com/ruk78m)

Investors are awaiting the results of the European Union examination of banks, which are due on Friday and are expected to show generally positive results for Greece, Italy and Ireland and a few failures in Portugal and Spain.

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(Additional reporting by Matthew Robinson in New York; David Turner and David Sheppard in London and Alejandro Barbajosa in Singapore; Editing by Lisa Shumaker)

Oil hits 11-week high above $79 on storm threat