Oil Rises as Prediction Recession to End Sparks Equity Rebound

June 9 (Bloomberg) -- Crude oil gained in New York, snapping two days of losses, after a late-day rally in U.S. stocks spurred by Nobel Prize-winning economist Paul Krugman’s prediction the recession will end by September.

American Express Co. and JPMorgan Chase & Co. climbed more than 2.4 percent to lead the Dow Jones Industrial Average higher after Krugman said “there’s some reason to think that we’re stabilizing.” Oil, which has closed above $60 a barrel each session since May 20, touched a seven-month high of $70.32 on June 5.

“Equities did finish the session fairly strongly in the last hour, which might be providing some support to oil at this point,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “This $60 to $70 a barrel level is fundamentally reasonable.”

Crude oil for July delivery gained as much as 81 cents, or 1.2 percent, to $68.90 and was at $68.68 on the New York Mercantile Exchange at 10:16 a.m. in Sydney. Yesterday, the contract fell 35 cents, or 0.5 percent, to settle at $68.09. Futures touched a seven-month high of $70.32 on June 5.

Prices rose in electronic trading as equities rebounded. The Standard & Poor’s 500 Index slipped 0.1 percent, after tumbling as much as 1.5 percent, and the Dow added less than 0.1 percent. Krugman, a Princeton University economist, said yesterday he wouldn’t be surprised “if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer.”

The dollar traded at $1.3899 per euro at 6:19 a.m. in Tokyo, after rising 0.5 percent yesterday and touching $1.3806, the strongest level since May 28.

Inventory Survey

“To keep this uptrend in place we are going to need to see evidence in physical demand recovery and perhaps not too much more strengthening of the U.S. dollar,” Hassall said.

Analysts were split over whether crude-oil stockpiles rose or declined last week. Supplies were probably unchanged at 366 million barrels, according to the median of eight respondents in a Bloomberg News survey. Four analysts forecast a decline and four said there was an increase.

Gasoline supplies probably rose 1.15 million barrels in the week ended June 5 from 203.2 million the previous week, the survey showed. Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably increased 1.05 million barrels from 150 million.

Gasoline for July delivery gained 1.2 cents, or 0.6 percent, to $1.947 a gallon in New York at 10:01 a.m. in Sydney. Yesterday, it slipped 1.86 cents, or 1 percent, to end the session at $1.936.

Price Warning

Crude is poised for a price “spike” amid a lack of new investments, Jeroen van der Veer, chief executive officer of Royal Dutch Shell Plc, said at the Asia Oil and Gas Conference in Kuala Lumpur yesterday.

“The economy will turn, demand will come back and the overcapacity of supply will disappear,” van der Veer said.

Crude-oil prices may average $65 a barrel by the end of 2009 as the global economy begins to rebound, according to Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co.

Futures will average $61 a barrel in New York during the fourth quarter of 2009, according to the median forecast of 35 analysts tracked by Bloomberg News. Prices will average $50 over the April-through-June period, according to the analysts. Crude oil futures have averaged $56.21 so far this quarter.

“You’re really at the weakest point in May,” Eagles said in Kuala Lumpur. “Going forward, you’d expect to see some demand to increase even if the economy stays flat.”

Based on a study of consumption patterns over the past 15 years, demand could climb as much as 3 million barrels a day through December under the best-case scenario, Eagles said.

Brent crude for July delivery rose 16 cents, or 0.2 percent, to $68.50 a barrel on London’s ICE Futures Europe exchange at 10:24 a.m. Sydney time. Futures touched $69.91 on June 5, the highest since Oct. 21.