Crude Oil Rises on Rally in U.S. Equities, Fed Economic Report

April 16 (Bloomberg) -- Crude oil rose for the first time this week, as U.S. equities rallied and the Federal Reserve said several of the country’s biggest regional economies saw some moderation in the pace of their decline.

Oil gained as much as 1.2 percent after stocks climbed in the last hour of trading yesterday. Fed districts reporting a slower economic decline or signs of stabilization include San Francisco, the largest district, New York, Chicago, Kansas City and Dallas, the Fed said in its Beige Book business survey.

“Oil is trading up in the after-hours due to the 100-point rally in the Dow Jones over the course of the last hour of trading,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “The Beige Book spurred the market and hence is helping to boost the price of crude in the night market.”

Crude oil for May delivery rose 45 cents, or 0.9 percent, to $49.70 a barrel at 9:02 a.m. Sydney time on the New York Mercantile Exchange. Futures have traded between $43.62 and $54.66 a barrel over the past month. Prices are up 11 percent so far this year.

Yesterday, oil fell 16 cents, or 0.3 percent, to $49.25 a barrel, the lowest settlement on the Nymex since April 7, after a government report showed that U.S. stockpiles climbed to the highest level in almost 19 years as demand dropped.

The Energy Department report was “bearish, but it appears that a lot of people are giving credence to the idea that the economic contraction has ended, or at least slowed,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “It looks like the market has found a rough equilibrium right now.”

Inventories Climb

Oil inventories rose 5.67 million barrels to 366.7 million last week, the highest since September 1990, the Energy Department said yesterday. Total daily fuel demand averaged over the past four weeks was 18.7 million barrels, down 5.2 percent from a year earlier, according to the department.

Supplies were forecast to increase by 1.75 million barrels, according to the median of 14 analyst estimates in a Bloomberg News survey.

“Demand is terrible, inventories are at the highest level since 1990, and yet prices are hanging on at this high level,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “The market isn’t moving on its fundamentals. The focus moves from the stock market, the weaker dollar or inflation fears, depending on the day.”

The Standard & Poor’s 500 Index added 1.3 percent to 852.06. The Dow Jones Industrial Average jumped 109.44 points, or 1.4 percent, to 8,029.62. The Nasdaq Composite rose 0.1 percent.

Cushing Supplies

Stockpiles at Cushing, Oklahoma, where New York-traded West Texas Intermediate crude is delivered, fell 742,000 barrels to 29.2 million last week, the lowest since the week end Dec. 26.

“The Cushing drop is really important,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “That will keep crude from falling out of bed. It will keep the spot month steady.”

Gasoline stockpiles declined 944,000 barrels to 216.5 million in the week ended April 10, according to the department. Distillate fuels, a category that includes heating oil and diesel, fell 1.17 million barrels to 139.6 million.

Refineries operated at 80.4 percent of capacity, down 1.5 percentage points from the week before, the lowest since the week ended Sept. 26, when units were shut in the aftermath of hurricanes Gustav and Ike, the department said. A gain of 0.1 percentage point was forecast.

Demand Outlook

“Demand stinks,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “Until you see consumption increase and inventories drop, this market will remain range-bound.”

The Organization of Petroleum Exporting Countries cut its forecast for global oil demand this year for an eighth consecutive month because of the economic slump. The estimate was lowered by 430,000 barrels a day from the prior month to 84.18 million barrels, the producer group said. Demand for 2009 will contract by 1.37 million barrels a day, or 1.6 percent.

The International Energy Agency cut its 2009 oil-demand forecast last week for an eighth month, reducing its outlook by 1 million barrels a day to 83.4 million barrels.

Brent crude oil for June settlement fell 49 cents, or 0.9 percent, to settle at $52.44 a barrel yesterday on London’s ICE Futures Europe exchange. The May contract expired at the close of trading, after losing 17 cents, or 0.3 percent, to $51.79.