Market Close: May 5 UP
May 5th, 2015 by loren
Oil futures rallied Tuesday, with the U.S. benchmark settling above $60 a barrel for the first time in nearly five months as protests at a Libyan oil port fed concerns over supplies.
Adding support to oil prices, the European Commission raised its economic growth forecast for the eurozone, while U.S. data showed that services activity rose more than expected in April and the trade deficit soared 43% in March.
June crude tacked on $1.47, or 2.5%, to settle at $60.40 a barrel on the New York Mercantile Exchange. Tracking the most-active contracts, prices haven’t close above $60 or settled at a level that high since Dec. 10, according to FactSet. Meanwhile, Brent crude for June delivery on London’s ICE Futures exchange surged $1.07, or 1.6%, to $67.52 a barrel. “A combination of hampered exports in Libya combined with the expectation of tightening fundamentals in the U.S. to catapult [West Texas Intermediate crude] back above $60 [and] pole-vault Brent [above] $67,” said Matt Smith, a commodity analyst at Schneider Electric. “Protests have stopped crude flows to an eastern Libyan port, while the expectation of peaking U.S. production and higher demand for crude to refine into products as we move toward driving season has the bulls on the charge,” he said in a note.
Also, eurozone growth is predicted to come in at 1.5% this year, compared with a previous forecast of 1.3%. That boosts expectations for oil demand. Karim Rahemtulla, alternative investments strategist at The Oxford Club, attributed oil’s gains to the eurozone forecast as well as the Libya port shut down. He also pointed out that Saudi oil minister Ali al-Naimi has been quoted by CNBC as saying that no one can set the price of oil, “it’s up to Allah.” Al-Naimi also said he wasn’t worried about the possibility of more oil from Iran if sanctions are lifted.
The dollar also provided a lift to oil, as it fell against its major rivals. A weaker buck can help dollar-denominated commodities like oil, since it makes prices cheaper for holders of other currencies. Investors await the latest U.S. oil inventory data. The American Petroleum Institute, an industry group, will release its data late Tuesday, and a government estimate from the Energy Information Administration will follow Wednesday. Analysts polled by Platts forecast a weekly increase of one million barrels in crude supplies.