Oil climbed 3.1 per cent after the National Hurricane Center said that a low pressure area located in the Caribbean off Honduras and Grand Cayman has an 80 per cent chance of developing into a Hurricane this weekend and may head into the Gulf. The Storm will be named Hurricane Alex should it be upgraded to Hurricane status.

Crude for August delivery increased $US2.35 to settle at $US78.86 a barrel on the New York Mercantile Exchange. It was the biggest gain since June 9, and the highest close in seven weeks. The contract increased 0.8 per cent this week.

The low pressure area between the northern coast of Honduras and Grand Cayman is likely to become a tropical depression “at any time later today or Saturday” and may become a tropical cyclone during the next 48 hours, the hurricane center said at 2 p.m. Miami time today. The system will reach the Yucatan Peninsula “in a day or two.”

About 31 per cent, or 1.69 million barrels a day, of US oil production comes from federal waters in the Gulf of Mexico, according to the Energy Department.

Active season

The National Oceanic and Atmospheric Administration predicted an active hurricane season with 14 to 23 named storms. Eight to 14 of those storms are expected to become hurricanes and three to seven are likely to become major systems with winds of 111 miles (178 kilometers) per hour.

Storms this year may cut 26 million barrels of oil production in the Gulf, according to Energy Department estimates.

The euro was up 0.4 per cent at $US1.2388 at 3:12 p.m. after falling as low as 1.2254. A lower US currency versus the euro bolsters the appeal of crude as an alternative investment.

“The (US) dollar is weakening and it seemed to give crude a little boost,” said Phil Flynn, vice president of research at PFGBest in Chicago.

The premium of Nymex crude futures over Brent oil on the ICE Futures Europe exchange rose to 74 cents a barrel, the highest level since June 15.

“The storm forecast is the main reason why the premium picked up quite a bit today,” said Flynn. “Nymex is getting back to its normal premium to the Brent crude.”

Brent oil

Brent crude oil for August delivery gained $US1.65, or 2.2 per cent, to $US78.12 a barrel on the ICE exchange in London.

Brent may climb toward $US90 a barrel after it re-entered a rising “channel” that will draw prices higher, according to a technical analysis by Standard Chartered Plc.

Crude also climbed as a survey showed confidence among US consumers rose in June to the highest level since January 2008.

The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 76, the highest level since January 2008, from 73.6 in May. The gauge was projected to rise to 75.5, according to the median forecast of economists surveyed by Bloomberg News.

The S&P 500 rose 0.7 per cent to 1,081.07, and the Dow Jones Industrial Average gained 0.1 per cent to 10,166.33.

“The consumer sentiment is bullish,” said Tim Evans, an analyst at Citi Futures Perspective in New York. “The oil market is also relieved to see that the S&P 500 is not sagging after the GDP number, which was softer than expected.”

The US economy grew at a 2.7 per cent annual rate in the first quarter, less than a 3 per cent estimate issued last month, Commerce Department data showed.

GDP data

Gross domestic product was forecast to expand at a 3 per cent annual pace, according to the median estimate of 79 economists in a Bloomberg News survey.

Analysts surveyed by Bloomberg News were split over whether crude oil prices will rise or fall next week amid mixed economic reports and ample stockpiles.

Sixteen of 47 analysts, or 34 per cent, forecast crude will advance through July 2. Sixteen more respondents predicted that futures will decline. Fifteen said there will be little change.

US stockpiles of crude oil rose 2.02 million barrels to 365.1 million last week, the Energy Department said on June 23. The increase in inventories left supplies at the highest level for the period since 1990, according to the report.

The number of oil rigs operating in the US rose by nine to 583 this week, the highest level since January 1991, according to Baker Hughes Inc.

Oil volume in electronic trading on the Nymex was 456,708 contracts as of 3:17 p.m. in New York. Volume totaled 420,805 contracts yesterday, 46 per cent below the average of the past three months. Open interest was 1.25 million contracts, the lowest level since Jan. 5.

Posted by Shayne Heffernan on Jun 26th, 2010and filed underEquities, Latest News, Markets, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site