Oil steady as U.S. home sales advance

By Joshua Schneyer

NEW YORK (BestGrowthStock) – Oil steadied near $79 a barrel on Monday as stronger U.S. home sales stoked economic optimism, while oil output was restored in the Gulf of Mexico after Tropical Storm Bonnie passed uneventfully.

U.S. crude for September delivery settled unchanged at $78.98 a barrel.

Oil prices briefly reached $79.60 a barrel on Friday, an 11-week high for front-month crude, as offshore producers evacuated platforms and shut in output to brace for Tropical Storm Bonnie.

As much as 826,000 barrels a day of output was shut in by Saturday when Bonnie fizzled and left the region’s energy infrastructure unharmed, according to government estimates. By Monday, companies restored about half of the idled output and operations were returning to normal.

Government data showed U.S. sales of new homes rebounded strongly in June from May’s record low, driving the number of houses on the market to the lowest level in more than four decades.

The positive economic data helped lift oil and equities, which also rose after stronger earnings forecasts from package shipper FedEx Corp (FDX.N: ) (.N: ).

The Standard & Poor’s 500 Index (.SPX: ) rose nearly 1.1 percent in late trading, to a new one-month high.

ICE Brent crude settled up 5 cents at $77.50.

The dollar weakened against the euro, encouraging buying of dollar-priced commodities like oil, after last week’s European bank stress tests revealed vulnerabilities at just seven out of 91 banks across the region.

“The storm didn’t do any real damage so that provides some pressure, but the market is optimistic about the homes sales data, the stock market and that the banks’ stress test is over,” said Phil Flynn, analyst at PFGBest Research in Chicago.

GEOPOLITICAL CONCERNS

The dispute over Iran’s nuclear program also simmered. The European Union imposed tighter sanctions on Iran, approving measures to block oil and gas investment and curtail Tehran’s refining and natural gas capability.

Iran, the world’ fifth-largest crude exporter, is ready to return to talks on a nuclear fuel swap without conditions, its envoy to the International Atomic Energy Agency was quoted as saying by the official IRNA news agency.

Venezuelan President Hugo Chavez on Sunday threatened to cut off oil supplies to the United States, the largest crude buyer, should Colombia order any attack on Venezuela.

Venezuela has never carried out past threats by Chavez to cut supplies to the United States.

Tensions have risen between the South American countries after Colombia’s outgoing President Alvaro Uribe accused Venezuela of harboring Colombian rebel fighters.

Oil traders await the latest figures on U.S. oil inventories due on Tuesday and Wednesday. Last week’s reports showed unexpectedly large stock rises.

According to a Reuters analyst poll on Monday, this week’s data is likely to show that crude inventories fell by 1.8 million barrels last week, although product stocks were predicted to have risen. (EIA/S: )

U.S. crude oil prices should average $79.44 in 2010, according to a Reuters poll of 31 analysts, banks and government agencies on Monday. The figure was down from estimates of an average $79.86 a barrel in a June survey. (O/POLL: )

Investing Basics

(Additional reporting by Robert Gibbons in New York, David Turner in London and Fayen Wong in Perth; Editing by David Gregorio and Sofina Mirza-Reid)

Oil steady as U.S. home sales advance