Oil rises third month in a row on optimism

By Gene Ramos

NEW YORK (BestGrowthStock) – Oil prices rose on Friday, posting the third-straight monthly gain as higher economic growth in the United States and hopes of a bailout to help Greece avoid debt default sparked more risk-taking.

Benchmark U.S. crude futures rose 2.9 percent for the month, despite bulging U.S. oil inventories, and have gained in 13 of the last 15 months.

Oil investors were heartened as the first quarter U.S. economic expansion growth data featured consumer spending at the fastest pace in three years.

“The GDP report was perfect in that it supports the view of stronger oil demand going forward,” said Phil Flynn, analyst, PFGBest Research Chicago.

U.S. crude for June delivery settled 98 cents higher at $86.15 a barrel, rising for the third day in a row, after hitting an intraday high of $86.50, not far below an 18-month high of $87.09 hit on April 6.

April became the first month since October when the front-month contract traded continuously above $80.

ICE Brent crude for June ended up 54 cents at $87.44, after surging to the day’s high of $87.72, just below Brent’s year’s high of $87.75 reached on Monday.

Brent also rose for the third consecutive month and on the day traded $1.29 above U.S. benchmark futures, also known as West Texas Intermediate (WTI). WTI traded at discounts of more than $3 to Brent earlier this week under pressure from soaring inventories at the Cushing, Oklahoma, the delivery hub for crude oil traded at the New York Mercantile Exchange.

OIL SLICK IMPACT

An expanding oil slick from a leaking U.S. Gulf of Mexico oil well is beginning to affect oil prices.

U.S. crude oil imports may slow as oil tanker traffic is delayed in the U.S. Gulf of Mexico, investment bank Goldman Sachs said in a note to clients.

That could narrow the spread between U.S. crude futures and European Brent futures, as well as narrow the discount for prompt delivery barrels in U.S. markets, the note said.

Indeed, “both WTI timespreads and the WTI-Brent spread tightened substantially on news that waterways surrounding the Louisiana Offshore Oil Port (LOOP) could be blocked by the spill as early as Friday, and traffic of oil service boats and oil tankers through the Gulf will likely be slowed,” it said.

Earlier, Olivier Jakob, consultant at Petromatrix said that the oil spill could be a supportive factor for U.S. crude futures but negative for Brent if it began to disrupt oil imports in the U.S. Gulf.

“That would result in crude oil stock draws in the United States and the backed-up crude oil would force some redirection of barrels toward Europe, which would then pressure the Brent timespreads lower and force Brent back to a discount to WTI.”

U.S. gross domestic product expanded by 3.2 percent in the first quarter, the Commerce Department said in its first estimate, marking three straight quarters of growth after the worst recession since the 1930s.

Consumer spending, which normally accounts for about 70 percent of U.S. economic activity, added nearly 2.6 percentage points to the GDP growth, which, however, was lower than expected.

Greece is preparing severe austerity measures to secure an aid package, easing fears the debt crisis will spread across Europe, and boosting the euro.

Euro zone finance ministers will meet on Sunday to discuss Greece and will hold a news conference afterward. A spokesman said the group would likely give a figure for the euro zone-International Monetary Fund loans through 2012 for Greece.

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(Additional reporting by Christopher Johnson in London; Joshua Scheneyer in New York; Editing by Marguerita Choy)

Oil rises third month in a row on optimism