Oil Rises for a Third Day on Economic Optimism in U.S., Europe

Aug. 14 (Bloomberg) -- Crude oil rose for a third day after U.S. equities rallied to a 10-month high and the German and French economies unexpectedly grew, sparking hopes for a rebound in fuel demand.

Oil advanced as much as 2.9 percent after Europe’s two largest economies expanded by 0.3 percent in the second quarter. The Standard & Poor’s 500 Index rose to its highest in 10 months after the U.S. Federal Reserve said it would keep benchmark interest rates “exceptionally low” for an “extended period” to help sustain a recovery.

“With the S&P 500 hitting 10 month highs it is tough for oil to trade lower,” said Mike Sander, an investment adviser with Sander Capital in Seattle. “The support and optimism of the equities markets, oil is staying firm where it is in the $70 ballpark.”

Crude oil for September delivery rose as much as 68 cents, or 1 percent, to $71.20 a barrel on the New York Mercantile Exchange at 7:20 a.m. in Singapore. Yesterday, the contract gained 0.5 percent to settle at $70.52 a barrel. Futures have advanced 60 percent this year.

The rally is due to “real excitement about imminent economic recovery,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “There are no industry fundamentals behind this.”

Gross domestic product in Europe fell 0.1 percent from the first quarter, when it plunged 2.5 percent, the most since the euro-area data were first compiled in 1995, the European Union’s statistics office in Luxembourg said today.

German Growth

In Germany, Europe’s largest economy, second-quarter GDP rose a seasonally adjusted 0.3 percent from the first quarter, when it dropped 3.5 percent. The French economy also expanded 0.3 percent in the latest quarter.

Brent crude oil for September settlement gained 59 cents, or 0.8 percent, to close at $73.48 a barrel on London’s ICE Futures Europe exchange.

A report from the Energy Department on Aug. 12 showed U.S. crude inventories grew for a third week last week as demand extended declines. Oil supplies increased by 2.52 million barrels to 352 million in the week ended Aug. 7, the Energy Department said

U.S. total daily fuel use averaged 18.9 million barrels in the past four weeks, down 3 percent from a year earlier, the department said. U.S. gasoline consumption typically drops after the Labor Day holiday in early September.

Refiners cut operating rates by 1.1 percentage points to 83.5 percent of capacity, the lowest since May.

Gasoline production is constrained, said Antoine Halff, deputy head of research at brokerage Newedge LLC in New York. “The market is supported by the lack of supply.”

Gasoline for September delivery rose 0.9 percent to settle at $2.0374 a gallon on the exchange.