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US Oil Hits Five-Week High, Above $102 on Greece Optimism, U.S. Jobs Data

Thursday, 16 February 2012 03:08 PM

Oil advanced to a six-week high on optimism that Greece will get a second bailout and as U.S. jobless claims dropped to the lowest level since 2008.

Futures rose 0.5 percent after Pantelis Kapsis, a government spokesman, said Greece expects euro area finance ministers to approve a deal at a meeting on Feb. 20. Applications for unemployment insurance payments dropped 13,000 in the week ended Feb. 11 to 348,000, the Labor Department said.

“All of the markets are clearly rising on the latest Greek news,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. A bailout “should lead to greater stability and strength in all of the euro-zone economies and reduce the fear of a total default, which could have had terrible consequences.”

Oil for March delivery gained 51 cents to $102.31 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 4. Prices have gained 3.5 percent this year.

Brent oil for April rose $1.18, or 1 percent, to settle at $120.11 a barrel on the ICE Futures Europe exchange, an eight- month high.

Letters of commitment to implement the second aid plan won’t be required from party leaders outside the two supporting Prime Minister Lucas Papademos, Kapsis said in Athens.

“The Greek conservative leaders have finally signed on, which is removing a final impediment to assistance,” Kilduff said.

Equities, Euro Gain

U.S. stocks and the euro gained after the Greece bailout news. The Standard & Poor’s 500 Index rose as much as 1.1 percent. The euro strengthened 0.6 percent against the dollar after falling as much as 0.7 percent. A stronger euro and weaker dollar boost oil’s appeal as an investment alternative.

The European Central Bank is swapping its 50 billion-euro ($66 billion) Greek government bond holdings for new Greek bonds, Germany’s Die Welt newspaper reported, citing unidentified central bank officials. The swap will be completed by Feb. 20, Die Welt said in a pre-release of an article to be published tomorrow.

European governments may cut interest rates on emergency loans to Greece and use contributions from the ECB to plug a new financing gap in the second bailout program for Athens, two people familiar with the discussions said.

“If we aren’t going to have a meltdown, it’s good for risk assets,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The Germans, Finns and Dutch have gotten some real concessions out of the Greeks, and may be ready for a deal.”

Jobless Claims

Estimates for first-time jobless claims ranged from 350,000 to 380,000 in a Bloomberg survey of 45 economists. The Labor Department revised the prior week’s reading up to 361,000 from 358,000. The number continuing to collect jobless benefits dropped by 100,000 to 3.43 million, the fewest since 2008.

Total fuel demand increased 5.9 percent from a 12-year low to 18.7 million barrels a day last week, the Energy Department reported.

“The jobs number is pretty bullish,” said Phil Flynn, an analyst at PFGBest in Chicago. “If the jobs market starts to recover, oil demand will come back.”

Oil was also supported by other government data that beat expectations. The Commerce Department reported that U.S. builders broke ground on more homes than forecast in January and the Federal Reserve Bank of Philadelphia’s general economic index for February rose to 10.2, a four-month high.

“Economic numbers are showing the U.S. economy is recovering,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas.

Futures dropped as much as 0.9 percent in early trading after Moody’s Investors Service said it is reviewing the credit ratings of 17 banks and securities firms and as the U.S. played down Iran’s claim of a nuclear breakthrough.

Electronic trading volume on the Nymex was 563,699 contracts as of 2:39 p.m. in New York. Volume totaled 792,027 yesterday, 30 percent above the three-month average. Open interest was 1.48 million contracts.

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Thursday, 16 February 2012 03:08 PM
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