Oil, Gasoline Rise on Higher U.S. Fuel Demand, Equity Rally

Feb. 5 (Bloomberg) -- Crude oil rose and gasoline climbed to a 12-week high after a government report showed U.S. fuel consumption increased and the stock market rallied.

Demand for fuels during the past four weeks averaged 19.5 million barrels a day, up 0.6 percent from the average a week before, the Energy Department said yesterday. Oil gained as much as 2.3 percent after equities rebounded and an analyst predicted Goldman Sachs Group Inc. and Morgan Stanley will repay the government funds they received.

“The consumption numbers in yesterday’s report are being taken as a sign by some that the worst is over,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis.

Crude oil for March delivery rose 85 cents, or 2.1 percent, to $41.17 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the highest settlement since Jan. 30. Prices are down 7.7 percent this year and 53 percent from a year ago.

Gasoline futures for March delivery climbed 5.64 cents, or 4.6 percent, to $1.2748 a gallon in New York, the highest settlement since Nov. 13. Heating oil increased 4.02 cents, or 3 percent, to end the session at $1.3672 a gallon.

The average U.S. pump price of regular gasoline rose 0.7 cent to $1.907 a gallon, AAA, the nation’s largest motorist organization, said on its Web site today. Prices have declined 54 percent from the record $4.114 a gallon reached on July 17.

‘Tagging Along’

“The oil market has been tagging along with stocks,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “We are seeing strength in gasoline and other commodities, which is giving the market a boost.”

Goldman Sachs and Morgan Stanley led financial companies in the S&P 500 to a 3.8 percent advance. David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, said the securities firms will repay the $10 billion they each received from the U.S. government as soon as possible.

The S&P 500 rose 1.6 percent to 845.85. The index lost as much as 1.5 percent in early trading after initial jobless claims unexpectedly jumped to a 26-year high.

U.S. crude-oil supplies increased 7.2 million barrels to 346.1 million last week, according to the Energy Department. Inventories have gained in 17 of the past 19 weeks, leaving stockpiles 15 percent higher than the five-year average for the period, the department said.

Brent crude oil for March settlement rose $2.31, or 5.2 percent, to end the session at $46.46 a barrel on London’s ICE Futures Europe exchange. Brent futures traded at a $5.29 premium over West Texas Intermediate, the crude oil grade that’s traded in New York.

Brent Premium

“European crude is tighter than U.S. crude, and that should support Brent relative to WTI,” said Mike Wittner, head of oil research at Societe General SA in London.

The price of oil for delivery in April is $4.59 a barrel higher than for March, up from a $3.92 premium yesterday. December futures are $13.90 higher than the front-month contract, versus $13.29 yesterday. This structure, in which the future month’s price is higher than the one before it, is known as contango, and is often an indicator of oversupply.

“Rising crude oil inventories are weighing down on the front-month contracts,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “The Brent premium suggests that the global market isn’t overstocked.”

Volume in electronic trading on the exchange was 401,089 contracts as of 3:10 p.m. in New York. Volume totaled 474,433 contracts yesterday, down 3.6 percent from the average over the past three months. Open interest yesterday was 1.24 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

U.S. Unemployment

U.S. unemployment climbed to 7.5 percent, and payrolls fell by 540,000, the 13th consecutive decrease, according to the median estimate in a Bloomberg News survey before Labor Department figures tomorrow.

“The employment data tomorrow will probably be abysmal,” O’Grady said. “This could easily send the oil market lower.”

The Organization of Petroleum Exporting Countries decided on Dec. 17 to trim production by 9 percent beginning on Jan. 1. The 12-member group pumped an average 28.565 million barrels a day last month, down 1.05 million from December, according to a Bloomberg News survey of oil companies, producers and analysts.