Oil Steady as U.S. Equities Climb, Signaling Increased Demand

March 24 (Bloomberg) -- Crude oil was little changed from its highest close in almost four months after the U.S. stock market advanced, signaling that fuel use in the world’s biggest energy-consuming country will rebound.

Oil climbed 3.3 percent yesterday after equities increased on speculation that the Obama administration’s plan to rid banks of distressed assets will spur growth. Stock and commodity markets extended gains after a report showed that U.S. sales of previously owned homes unexpectedly climbed in February.

“We’ve had a number of bullish news items that are giving the market a boost,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “I’m looking at the impact of the Treasury plans on stock markets and the dollar. This is how it will impact the commodity markets.”

Crude oil for May delivery rose 4 cents to $53.84 a barrel at 9:19 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 21 percent this year. Yesterday, oil gained $1.73 to $53.80 a barrel, the highest settlement since Nov. 28.

The Standard & Poor’s 500 Index increased 7.1 percent yesterday to 822.92, the biggest increase since Oct. 28. The Dow Jones Industrial Average rose 6.8 percent to 7,775.86.

Home purchases increased 5.1 percent to an annual rate of 4.72 million from 4.49 million in January, the National Association of Realtors said yesterday in Washington.

Treasury Plan

“This is a macro-economic story,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. “There are now details about the Treasury plan to buy distressed assets. There is going to be additional massive expenditure, which will keep pressure on the dollar.”

The Treasury plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington.

The announcement provides details on an initial strategy laid out by Treasury Secretary Timothy Geithner last month, which caused a slump in stocks because it lacked an explanation of how the effort would work.

“Geithner finally gave us a defined plan, something people have been waiting for,” said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta. “There’s great anecdotal evidence that the economy has hit bottom.”

Brent Crude

Brent crude oil for May settlement advanced $2.25, or 4.4 percent, yesterday to $53.47 a barrel on London’s ICE Futures Europe exchange. Prices ended the session at the highest level since Nov. 28.

Suncor Energy Inc., the world’s second-largest oil-sands producer, agreed to buy Petro-Canada for C$19.3 billion ($15.6 billion) in a record takeover that will create the biggest Canadian energy company. It will yield savings and help Suncor shoulder high-cost oil-sands projects in northern Alberta.

“The market is getting a boost from the Suncor takeover of Petro-Canada,” Edmonds said. “It shows that someone is willing to make a long-term bet that prices will recover.”

The Organization of Petroleum Exporting Countries has reduced daily output targets by 4.2 million barrels since September in an effort to increase prices. The group held quotas steady at a meeting on March 15, pledging that members will tighten compliance with previous agreements.

“OPEC has succeed so far in supporting prices,” Sieminski said. “They’ve got to be vigilant about cheating and there can be no backsliding as far as compliance is concerned.”

OPEC, the International Energy Agency and the U.S. Energy Department cut their 2009 forecast for oil demand this month. OPEC, the IEA and DOE see consumption slumping more than 1 million barrels a day this year.