Oil rises as U.S. home sales expand and equities firm

By Joshua Schneyer

NEW YORK (BestGrowthStock) – Oil prices firmed on Wednesday after data showed pending U.S. home sales rose, boosting optimism about economic recovery and also lifting equities.

U.S. pending home sales in April rose more than expected to a six-month high, according to a monthly survey. The index has risen in three consecutive months, fueling optimism that an economic recovery is gaining steam in the world’s top economy.

U.S. crude for July settled up 28 cents a barrel, or 0.4 percent, to $72.86, after losing nearly 2 percent on Tuesday. Oil had risen as high as $73.93 a barrel earlier Wednesday, but pared some gains by afternoon settlement.

Price gains in NYMEX oil for delivery in later months were steeper, with October and November barrels rising more than 2 percent each in post-settlement trading.

Europe’s ICE Brent settled up $1.04 a barrel to $73.75.

“The pending home sales helped the stock market and oil,” said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.

Following the U.S. home sales data, oil and equities rose despite concerns about fuel demand in the face of Europe’s debt crisis and a slowdown in manufacturing growth across the globe in May.

U.S. retail gasoline demand rose 3.7 percent in the week ending May 28 due to heavy driving over the Memorial Day holiday, SpendingPulse reported. Year-on-year, U.S. gasoline demand was up 5 percent, the report said.

Investors showed appetite for riskier assets and analysts said crude prices were taking direction from a rise in stock markets, which mostly fell on Tuesday.

“Equities are recovering some of their losses. It will be very important to see what equities are doing as they have been an indicator for the level of risk aversion in the market,” said Commerzbank analyst Eugen Weinberg.

Concerns about a reduction in future offshore oil output following the BP oil spill in the Gulf of Mexico may also be supporting prices, Weinberg said.

Oil markets turned sour in May, when crude posted its sharpest monthly fall since 2008, dropping 14 percent amid concerns about Europe’s debt crisis.

The euro slid to a near four-year low against the dollar on Wednesday, helping to stem any bigger rally for crude prices, since a firming dollar makes oil more expensive for holders of foreign currencies.


Some analysts said they expected oil prices to become less volatile than they were last month, staying in the $70-$75 a barrel range in the near term.

“We could have some stability. The current level takes into account the fact that the recovery appears to be slowing but also the fact that we are not going to have a double dip,” said analyst Christophe Barret at Credit Agricole CIB.

Technical chart analysts say oil prices could fall toward the next key support cushion of $70 a barrel.

That is also the low point of the $70-$80 range that the Organization of the Petroleum Exporting Countries (OPEC) deems satisfactory for both producers and consumers.

Weekly U.S. oil stocks data is due later Wednesday. Industry group, American Petroleum Institute will issue its report at 4:30 p.m. EDT. The more authoritative U.S. Energy Information Administration data is delayed until 11 a.m. EDT on Thursday because of a U.S. holiday on Monday.

U.S. crude oil inventories are forecast to have fallen by 100,000 barrels last week and gasoline stocks are expected to have fallen by 500,000 barrels, according to an updated Reuters survey.

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(Additional reporting by Robert Gibbons in New York, Emma Farge in London and Alejandro Barbajosa in Singapore; Editing by David Gregorio)

Oil rises as U.S. home sales expand and equities firm