Oil up on US economy; heat wave lifts gas

NEW YORK—Upbeat US economic news boosted the price of oil yesterday, while scorching temperatures lifted natural gas to its highest level in more than five months. Benchmark crude rose 85 cents to US$80.21 per barrel in New York. Brent crude, which is used to price international varieties of oil, gained 48 cents to US$93.50 per barrel in London.

The Commerce Department said factories received more orders in May for long-lasting manufactured goods such as heavy machinery, computers and communications equipment. Oil and other energy products benefit from stronger manufacturing because they are used to help make and ship goods.

The report helped ease recent concerns about slower factory production in the US. Separately, the National Association of Realtors said that Americans signed more contracts to buy previously occupied homes in May, which matched the fastest pace in two years. It follows other recent data that shows steady improvement in the housing market this year. “Once again, US economic data is confounding the critics,” Price Futures Group oil analyst Phil Flynn said. “Maybe the economy isn't so dreary.”

Still, job growth remains tepid, consumer confidence fell in June for the fourth straight month and demand for gasoline remains weak as Americans worry about jobs and the overall economy. More immediately, Americans in the middle of the country worried about staying cool. Temperatures rose above 100 degrees in Texas, Kansas and a number of other states on Wednesday. The hot weather is expected to extend eastward as the week goes along.

That’s giving a boost to natural gas prices, which have been depressed most of the year because of a mild winter and overproduction. Natural gas rose 7 cents to US$2.774 per 1,000 cubic feet. That’s the highest closing price since Jan 11. It rose as high as US$2.946 earlier in the day.

Oil traders will now keep a close eye on developments in Europe as government leaders meet to discuss the crippling debt crisis. Traders are uncertain what will happen during the two-day European summit, which starts Thursday. The goal is to work on solutions to the crisis has hurt economies within the eurozone and has filtered out to the US, China and other countries.

But German Chancellor Angela Merkel warned Wednesday that there would be no quick solution to the structural issues plaguing the continent. In the morning, the Energy Department said that the nation's crude oil supplies fell by 100,000 barrels to 387.2 million barrels, which is 7.7 percent above year-ago levels. Gasoline supplies grew by 2.1 million barrels to 204.8 million barrels.

Demand for gas over the four weeks ended June 22 was 4.8 percent lower than a year earlier. In other trading, heating oil increased 1.72 cents to US$2.5937 per gallon and wholesale gasoline fell 2.47 cents to US$2.62 per gallon.

AP