Crude oil climbed the most in five weeks as the dollar tumbled to a 15-year low against the yen and a government report showed a smaller-than-forecast U.S. stockpile gain.
Oil rose 2.9 percent after the Federal Reserve said the economy expanded at a “modest pace” in September and early October, sending the U.S. currency lower. A weaker dollar bolsters the appeal of raw materials to investors. An Energy Department report showed that supplies rose 667,000 barrels last week, less than half the projection in a Bloomberg News survey.
“It’s all the dollar,” said Richard Ilczyszyn, a market strategist at Lind-Waldock, a broker in Chicago. The dollar will probably remain weak until after the Federal Reserve meeting and the congressional elections in November, he said.
Crude oil for November delivery rose $2.28 to settle at $81.77 a barrel on the New York Mercantile Exchange. It was the biggest gain since Sept. 10. Futures are up 3.4 percent from a year ago.
The November contract expired today. The more-active December futures increased $2.38, or 3 percent, to $82.54.
Brent crude oil for December settlement gained $2.50, or 3.1 percent, to end the session at $83.60 a barrel on the London-based ICE Futures Europe exchange.
Futures in New York tumbled 4.3 percent yesterday, the biggest drop since Feb. 4, after an unexpected rate increase by China’s central bank raised speculation that fuel demand will decrease in the world’s biggest energy-consuming country.
Eight Fed banks, including San Francisco and Chicago, reported some form of growth, the Fed said today in its Beige Book business survey by the 12 regional banks. The Philadelphia and Richmond Fed banks said their economies were “mixed” while the Cleveland region “held steady” and the Atlanta district “remained slow.”
The dollar declined 0.5 percent to 81.15 yen from 81.58 yesterday. It touched 80.85, the weakest level since April 1995. The U.S. currency fell 1.8 percent against the euro to $1.3974.
The Fed’s next meeting is on Nov. 2 and Nov. 3 in Washington. The U.S. elections will occur on Nov. 2.
“The market reaction to the Chinese interest rate rise doesn’t appear to have legs,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund focusing on energy. “It’s back to reality, with the dollar on the decline once again in advance of the coming moves by the Federal Reserve.”
Increasing equities also bolstered the oil market. Stocks rebounded from the biggest drop since August yesterday, as higher-than-estimated results at Boeing Co. and Yahoo! Inc. fueled optimism in corporate earnings.
The Standard & Poor’s 500 index rose 1.3 percent to 1,180.60 at 3:26 p.m. in New York, and the Dow Jones Industrial Average increased 1.4 percent to 11,132.15.
Total U.S. crude-oil stockpiles were forecast to increase 1.5 million barrels in the week ended Oct. 15, according to the median of 15 analysts surveyed by Bloomberg News.
Crude inventories at Cushing, Oklahoma, the delivery point for New York futures, dropped 1.05 million barrels to 34 million, the biggest decline since January. The decrease left stockpiles at the lowest level since the week ended April 9.
“The market seems to be focusing on the draw in Cushing,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “It’s related to the lag effect from the Enbridge pipeline outage that we had a couple of weeks ago.”
Enbridge Energy Partners LP shut its 6A oil pipeline, the largest conduit linking Canada and the U.S. Midwest, from Sept. 9 to Sept. 17. Refineries took deliveries from Cushing to make up for the missing Canadian barrels.
Stockpiles of distillate fuel, a category that includes heating oil and diesel, fell 2.16 million barrels to 170.1 million, the biggest decline since March. A 1 million-barrel decrease was forecast.
“The drop in distillate is probably the most supportive part of the report,” said Phil Flynn, vice president of research at PFGBest in Chicago. “It may reflect the situation we have in France. France is importing a record amount of diesel and this may be the first sign that it’s impacting U.S. supply.”
French police opened three fuel depots blocked by protesters in the country’s west and the government said imports reached a record as ports and refineries remained shut because of a strike. France has 213 fuel storage depots across the country, some of which have been blocked by workers protesting a plan to raise the retirement age from 60 to 62.
Imports of refined products rose after temporary changes in tax and customs procedures, the government said in a statement after a weekly cabinet meeting. France imports diesel, which powers more than three-quarters of new cars, and exports gasoline. Diesel shortages have been more widespread than gasoline since the protests began.
Heating oil for November delivery rose 6.55 cents, or 3 percent, to settle at $2.2548 a gallon on the Nymex.
Oil volume on the Nymex was 685,922 contracts as of 3:14 p.m. in New York. Volume totaled 869,362 contracts yesterday, 26 percent above the average of the past three months. Open interest was 1.42 million contracts.
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