Crude Oil Rises, Set for Biggest Monthly Increase Since June

March 31 (Bloomberg) -- Oil rose, set for the biggest monthly gain since June, on speculation governments’ widening stimulus plans will boost the global economy and fuel demand.

Crude gained as much as 1.7 percent to $49.24 a barrel on the New York Mercantile Exchange, rebounding after a slump in U.S. stocks prompted the biggest drop in four weeks yesterday. Oil has risen 9.9 percent this month after U.S. Treasury Secretary Timothy Geithner unveiled a plan to remove toxic assets from banks.

“There are expectations that later in the year we are likely to see some of these efforts working,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. This will “thereby improve the global economy and have a positive impact on demand,” he said.

Crude oil for May delivery was at $49.17 a barrel at 11:42 a.m. Singapore time. Yesterday, it fell $3.97, or 7.6 percent, to $48.41 a barrel, the lowest settlement on the Nymex since March 18 and the biggest decline since March 2.

Crude has gained 10 percent this quarter after tumbling 56 percent in the previous three months. This month’s gain was the biggest since a 9.93 percent jump in June.

Oil dropped yesterday after President Barack Obama said that General Motors Corp. and Chrysler LLC have one last chance to “fundamentally restructure.” GM plunged as much as 34 percent as the company’s recovery plan was rejected by the government and Chief Executive Officer Rick Wagoner was forced to resign.

Commodities

U.S. stocks slumped the most in three weeks yesterday on the warning to automakers and because the administration said that some banks will need more government aid. The Standard & Poor’s 500 Index declined 3.5 percent to 787.53. The Dow Jones Industrial Average fell 254.16, or 3.3 percent, to 7,522.02. It was down more than 300 points when oil floor trading ended.

“It was hope about the future that pushed prices higher and now that hope has evaporated because it was unfounded,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “The fundamentals do eventually win out. The inventories are still too high.”

Dow futures expiring in June rose 0.2 percent to 7,494 at 9:14 a.m. Sydney time. S&P futures added 1.90, or 0.2 percent, to 786.20.

The euro fell against the dollar for a fourth day. The dollar strengthened 0.1 percent to $1.3189 per euro from $1.3199. A stronger dollar reduces the appeal of commodities and oil for investors as a hedge against inflation.

Copper has dropped 54 percent in the past year as the financial turmoil, slumping auto and housing markets and rising unemployment curbed economic growth.

Gold gained, headed for its best quarter in a year, on increased demand for the precious metal as a store of value and hedge against accelerating prices as central banks boost spending to fight the global recession.

Oil Stockpiles

The Reuters/Jefferies CRB Index of 19 commodities fell 7.09 points, or 3.2 percent, yesterday to 215.17, the biggest one-day drop since March 2.

U.S. crude oil stockpiles surged 3.3 million barrels to 356.6 million barrels in the week ended March 20, the highest since July 1993 and 13 percent more than average for this time of year, according to an Energy Department report on March 25. Supplies probably rose 3.5 million barrels last week, according to the median of nine responses in a Bloomberg News survey.

Brent crude oil for May settlement rose as much as 91 cents, or 1.9 percent, to $48.90 a barrel on London’s ICE Futures Europe exchange. It was at $48.83 a barrel at 11:37 a.m. Singapore time.

It fell $3.99, or 7.7 percent, yesterday to end the session at $47.99 a barrel. The contract touched $47.66, the lowest since March 18.