Crude Oil Trades Little Changed Near $86 on Stronger Dollar, Growth in China

Crude oil fluctuated around $86 a barrel as economic growth in China accelerated and a stronger dollar dampened the investment appeal of commodities. Oil traded between $85.32 and $86.27 today as the economy in China, the second largest oil user, expanded by 11.9 percent in the first quarter. The dollar snapped a five day losing streak against the euro, and U.S. oil supplies fell for the first time in 11 weeks in a government report yesterday.

“The market’s sitting on top of what looks like very impressive data coming out of China,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “You’ve got the dollar pretty strong this morning, yet oil prices are not getting clobbered, which is not something we would have seen three or four months ago.” Crude oil for May delivery rose 15 cents to $85.99 a barrel at 9:53 a.m. on the New York Mercantile Exchange. Oil has climbed 75 percent in the past year.

China’s growth in gross domestic product was higher than the median 11.7 percent estimate in a Bloomberg News survey of 24 economists. The U.S. is the largest energy consuming country. Chinese refiners processed 34.56 million metric tons of crude in March, 18 percent more than the same month last year, according to China Mainland Marketing Research Co., which compiles data for the government. That’s the highest level after volume reached 34.6 million tons in December.

“Today’s sentiment still seems bullish with strong economic statistics from China,” said Andy Sommer, an analyst at EGL AG in Dietikon, Switzerland. The dollar advanced 0.7 percent against the euro to $1.3553 from $1.3653 yesterday in New York.

U.S. Supplies
U.S. crude oil inventories dropped 2.2 million barrels, or 0.6 percent, last week to 354 million barrels, the Energy Department reported yesterday. It was the first decline since the week ended Jan. 22. Supplies were 5.1 percent above the five year average, down from 7.1 percent the week before. Manufacturing production in the U.S. accelerated in March as factories spearheaded the recovery from the worst recession since the 1930s.

Output at factories climbed 0.9 percent after a 0.2 gain in February that was revised from a previously estimated decline, Federal Reserve figures showed today. Warmer weather caused utility use to drop by the most in four years, limiting the overall gain in industrial production to 0.1 percent, less than anticipated. The number of Americans filing claims for jobless benefits unexpectedly increased last week, indicating the improvement in the labor market will take time to unfold.

U.S. Jobs
Initial jobless applications increased by 24,000 to 484,000 in the week ended April 10, the highest level since Feb. 20, Labor Department figures showed today in Washington. A Labor Department spokesman said the rise in claims was due more to administrative factors reflecting volatility around Easter than economic reasons.

Brent crude oil for May, which expires today, rose $1.30, or 1.5 percent, to $87.45 a barrel on the London-based ICE Futures Europe exchange. Earlier, it touched $87.58, the highest level since October 2008. The more actively traded June contract gained 86 cents, or 1 percent, to $87.76 a barrel.

Reporter Margot Habiby can be contacted at mhabiby@bloomberg.net.


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