Crude Oil Rises More Than $1 After U.S. Housing Starts Climb

July 17 (Bloomberg) -- Crude oil rose more than $1 a barrel as construction of single-family dwellings jumped by the most since 2004, a sign the worst of the recession may have passed.

Oil increased after the Commerce Department reported that construction of single-family homes climbed 14 percent in June. The report also showed that total housing starts rose to the highest since November. Futures tumbled to $32.40 a barrel in December, a four-year low, as the economic contraction curbed demand, allowing stockpiles to grow.

“The housing starts number was frankly great,” said Bill O’Grady, the chief market strategist for Confluence Investment Management in St. Louis. “You are starting to see evidence that the worst of the recession is over.”

Crude oil for August delivery rose $1.54, or 2.5 percent, to $63.56 a barrel at 2:50 p.m. on the New York Mercantile Exchange, the highest settlement price since July 6. Oil climbed 6.1 percent this week, the first weekly gain since June 12. Futures are down 57 percent from a record $147.27 a barrel reached on July 11, 2008.

Gasoline for August delivery rose 5.64 cents, or 3.3 percent, to end the session at $1.7699 a gallon on the New York exchange. It was the highest settlement since July 2.

“Some green shoots may finally be starting to appear, which is good for the market,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston.

U.S. industrial production fell in June at the slowest pace in eight months, according to a report on July 15, when oil prices increased 3.4 percent.

Upbeat News

“The economic news this week has been a little bit more upbeat, and that’s carried us higher,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “It’s reasonable to expect prices to soon test $65.”

China, the second-biggest energy consumer after the U.S., processed a record volume of crude oil in June as faster economic growth boosted fuel demand and refining profits encouraged production.

Oil processing rose for a fifth month to 31.9 million metric tons, or about 7.76 million barrels a day, China Mainland Marketing Research Co., which compiles data for the government, said in a statement today.

“Developing countries are going to grow and consume more energy,” said Paul Crovo, a Philadelphia-based oil analyst with PNC Capital Advisors. “This may be enough to offset tepid growth in the developed countries, like the U.S., and provide for reasonable growth in demand.”

Demand Growth

The International Energy Agency forecast that global demand will increase by 1.4 million barrels a day, or 1.7 percent, to 85.2 million next year, in a July 10 report.

Growth will be concentrated in emerging economies outside the Organization for Economic Cooperation and Development, according to the Paris-based agency. Non-OECD consumption will rise 3.5 percent in 2010 as demand among members of the group increases 0.2 percent, the report showed.

Rising crude oil and gasoline prices helped send the Reuters/Jefferies CRB Index of 19 raw materials higher. The index gained 1.7 percent to 245.05, the biggest increase since June 11.

Brent crude for September settlement climbed $1.63, or 2.6 percent, to end the session at $65.38 a barrel on London’s ICE Futures Europe Exchange.

OPEC Shipments

The Organization of Petroleum Exporting Countries will trim shipments by 0.8 percent to 22.55 million barrels a day in the four weeks ended Aug. 1, consultant Oil Movements said yesterday. OPEC estimated in a July 14 report that its compliance with record supply cuts announced last year dropped to 72 percent in June after production rose for a third month.

“Oil prices had increased to $72 a barrel, then down to $58, and today is $62, therefore there is a volatility that at this moment is not satisfactory,” Angolan Oil Minister Jose Maria Botelho de Vasconcelos told reporters today in Luanda, Angola. The minister, who is also OPEC’s president, said he wanted oil at a “level of equilibrium.”

Oil may rise next week as better-than-expected second- quarter earnings bolster the outlook for a recovery in demand, a Bloomberg News survey of analysts showed. Seventeen of 37 analysts surveyed, or 46 percent, said futures will climb through July 24. Ten respondents, or 27 percent, forecast that prices will be little changed, and 10 expected a decline.

Crude oil volume in electronic trading on the Nymex was 464,054 contracts as of 3:02 p.m. in New York. Volume totaled 575,045 contracts yesterday, 15 percent higher than the average over the past three months. Open interest was 1.17 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.