Oil rises above $85 on strong U.S. economic data

By Daniel Wallis

NEW YORK (BestGrowthStock) – Oil rose above $85 a barrel on Friday as a sharp jump in U.S. new home sales signaled a stronger economic recovery and boosted the outlook for energy demand.

U.S. crude for June delivery settled up $1.42, or 1.7 percent, at $85.12 a barrel. An 18-month high above $87 was last reached on April 6.

But U.S. crude was trading more than $2 below ICE Brent for June, the benchmark for most of Europe, Africa and Asia, which rose $1.54, or 1.8 percent, to $87.21 a barrel.

“The very positive new home sales report was good for crude,” said Robert Yawger, senior vice president, energy futures at MF Global in New York.

“The Brent premium to WTI is being supported by the high inventories at Cushing and Asian demand,” he added.

Most traders think Brent better represents world oil balances, because U.S. crude prices can be locally affected by gluts at the land-locked Cushing, Oklahoma pricing point, where stocks jumped last week.

NYMEX May gasoline futures ended at their highest level since October 2008 on expectations that the better economic outlook could boost demand ahead of the summer driving season, which traditionally begins during the last week of May.

Wall Street stocks edged up after data showed sales of newly built U.S. single-family homes surged nearly 27 percent in March to touch their highest level in eight months, adding to optimism about corporate earnings.

Oil prices were also supported by growing demand in booming China and India, and by indebted Greece’s decision to activate European Union and International Monetary Fund aid, though doubts remained over whether it would lead to a long-term fix.

Demand for crude is set to grow seasonally in the agriculture and transport sectors.

“We are going to see more demand coming in spring and summer and that is going to push prices higher,” said Peter McGuire, managing director of Commodity Warrants Australia in Sydney, adding that he expected oil to approach $90 in June.

The euro rebounded from one-year lows against the dollar after Greece sought to activate the financial aid package, and Germany said it was ready to commit to the plan to bail out the debt-strapped country.

Energy-hungry China’s economy (Read more about the fastest growing economy.) will probably grow by about 9.9 percent this year, compared with a previous outlook of 9.1 percent, according to forecasts published by the Chinese Academy of Social Sciences.

And prices were also supported by improving business sentiment in Germany, the world’s third largest economy, where a closely watched survey gave the brightest outlook from 7,000 firms since May 2008.

Stock Market Trading

(Additional reporting by Robert Gibbons and Gene Ramos in New York, David Sheppard in London and Alejandro Barbajosa in Singapore; Writing by Daniel Wallis; Editing by David Gregorio)

Oil rises above $85 on strong U.S. economic data