Oil jumps 4 percent on equities rally

By Gene Ramos

NEW YORK (BestGrowthStock) – Oil jumped 4 percent on Thursday and posted its biggest two-day gain since mid-August as China’s assurance about its euro-zone investments sparked a global rebound in equities and fed more bets for riskier assets.

Oil also rose as a forecast for an intense Atlantic hurricane season fueled fears of disruption in U.S. supplies, also prompting speculative buying.

Prices were already up more than 3 percent before the government released its initial forecast for this year’s storm season.

“The NOAA forecast calling for an intense Atlantic hurricane season this year is having an impact on oil futures, with storm premium being factored into prices,” said Phil Streible, senior market strategist at Lind-Waldock in Chicago.

“This adds to the earlier boost that came from higher equities. We’ve also seen a weakening of the dollar … that has encouraged speculators to buy in,” Streible said.

The day’s rally was a follow-through of Wednesday’s heady advance that was supported by encouraging demand for U.S. fuels last week as reported by the government, even though domestic crude stocks continued to rise. (EIA/S: )

U.S. crude futures for July delivery settled $3.04 higher, up 4.25 percent, at $74.55 a barrel. That extended gains in two days to 8.4 percent, the biggest since a two-day advance on August 18-19. July crude has recovered from Tuesday’s low of $67.15, the contract’s lowest since July 2009.

ICE Brent July crude futures gained $2.92, or 4 percent, to settle at $74.66. Brent also gained for two straight days, advancing 7.3 percent in that period, after nine losing sessions.

At one point, U.S. crude gained as much as 24 cents against Brent, hoisting a premium for the first time since April 12. It fell to a discount as deep as $6.57 in mid-May due to a build-up in crude stored in Cushing, Oklahoma, the delivery hub for oil futures traded on the New York Mercantile Exchange.

But Wednesday’s data from the U.S. Energy Information Administration showed inventories at the hub slipped in the week to May 21 for the first time in nine weeks, narrowing the WTI/Brent spread.

However, on Thursday industry data provider Genscape said that inventories there hit another record high in the week to May 25, rising 478,000 barrels to 39.9 million barrels, from a week earlier.

U.S. equities jumped about 3 percent, a primary boost for crude futures as it signals oil demand could improve, after China denied a report that it was reviewing its holdings of euro-zone sovereign bonds due to the region’s debt crisis.

A forecast by the top U.S. government climate agency that the Atlantic storm season may be the most intense since 2005, when Hurricane Katrina devastated Gulf of Mexico energy facilities, prompted further buying of oil futures.

In its first outlook for the storm season that begins next Tuesday, the National Oceanic and Atmospheric Administration forecast 14 to 23 named storms, with eight to 14 turning into hurricanes, nearly matching 2005’s record of 15.

The forecast comes as BP (BP.L: ) continued its latest attempt to plug a ruptured oil well on the Gulf of Mexico.

Crude’s gains came amid a broad-based rebound in the 19-commodity Reuters-Jefferies CRB index (.CRB: ) by 1.7 percent, taking gains over two days to 3.4 percent, the biggest rise since September and coming after a reversal from Tuesday’s 8-1/2 month low.

Oil traders turned a little cautious earlier after data showed that the U.S. economy grew at a 3.0 percent annual rate in the first quarter, a slower pace than previous estimate of 3.2 percent, as business investment slackened.

On Wednesday U.S. crude rose 4 percent, its biggest one-day percentage gain in nearly eight months, after EIA data showed increases in U.S. demand for gasoline and diesel. (EIA/S: )

Demand for gasoline rose ahead of this week’s Memorial Day holiday weekend that kicks off the U.S. summer driving season. Particularly bullish also was a rise in diesel demand, noted Barclays Capital analyst Paul Horsnell.

As diesel is used for large trucks, its demand is often used as a gauge to measure economic activity.

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(Additional reporting by Robert Gibbons in New York; Ikuko Kurahone in London; and Alejandro Barbajosa in Singapore)

Oil jumps 4 percent on equities rally