September 7th, 2011

Crude oil climbed the most in four weeks in New York as a weather system threatened to reduce U.S. production from the Gulf of Mexico, where shut-ins from last week’s storm probably curbed stockpiles.

Futures rose as much as 4.3 percent as the disturbance in Mexico’s Bay of Campeche strengthened. The Energy Department may report that inventories fell 2 million barrels last week as Tropical Storm Lee shut output, according to a Bloomberg News survey. Oil also rose on speculation President Barack Obama will announce plans for more than $300 billion in stimulus.

“A new storm is building up strength, which is giving the market a boost,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The API report tonight and the DOE report tomorrow will probably show a crude draw. There’s also optimism that President Obama will announce additional stimulus in his upcoming speech.”

Crude oil for October delivery rose $3.46, or 4 percent, to $89.48 a barrel at 12:42 p.m. on the New York Mercantile Exchange. The intraday high was $89.74.

Brent oil for October settlement advanced $2.80, or 2.5 percent, to $115.69 on the London-based ICE Futures Europe Exchange. The European benchmark contract was at premium of $26.21 to U.S. futures, compared with yesterday’s record $26.87 based on settlement prices.

API Report

The American Petroleum Institute is scheduled to release its weekly inventory numbers at 4:30 p.m. today in Washington and the Energy Department will release its weekly stockpile data at 11 a.m. tomorrow in Washington. Both reports are a day late because of the Labor Day holiday on Sept. 5.

The Energy Department report will show that gasoline supplies decreased 1.3 million barrels in the week ended Sept. 2, according to the median of 14 responses in the survey. Analysts were split over whether stockpiles of distillate fuel, a category that includes heating oil and diesel, slipped or increased last week.

Gasoline for October delivery rose 7.3 cents, or 2.6 percent, to $2.8956 a gallon in New York.

“The expectation that U.S. stock levels will be down due to shut-ins in the Gulf of Mexico, and the missing barrels from Libya are keeping prices up,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “Oil is stronger than all the other markets around the world, so if there are signs the debt crisis cannot be overcome, I see a bigger downside for oil. But at the moment, oil is supported.”

Tropical Disturbance

The disturbance in the Bay of Campeche is showing “signs of organization” and may strengthen into a tropical cyclone in the next day, the National Hurricane Center said at 11 a.m. New York time. The bay, where conditions are conducive for strong storms, holds rigs and platforms owned by Petroleos Mexicanos.

About 60.5 percent of U.S. oil production and 41.6 percent of natural gas output from the Gulf of Mexico has been halted after Tropical Storm Lee passed through the region, the Bureau of Ocean Energy Management, Regulation and Enforcement said yesterday. The Gulf is home to 27 percent of U.S. oil output and 6.5 percent of the country’s natural gas production.

“We’re moving higher on short-term headlines,” said Stephen Schork, president of the Villanova, Pennsylvania-based Schork Group Inc. “About 60 percent of Gulf production is still offline, which is prompting bids on oil.”

Address to Congress

President Obama will address Congress tomorrow amid unemployment that remains at 9.1 percent more than two years after the recession’s official end. He plans to propose sparking job growth, mostly through tax cuts, infrastructure spending and direct aid to state and local governments.

The Standard & Poor’s 500 Index advanced 2.3 percent to 1,191.40 and the Dow Jones Industrial Average increased 1.8 percent to 11,342.28.

The dollar fell 0.5 percent to $1.4068 against the euro after Germany’s top court rejected constitutional challenges to the nation’s participation in the region’s rescue funds. A falling U.S. currency bolsters the appeal of dollar-denominated raw materials such as oil.

Oil volume in electronic trading on the Nymex was 408,564 contracts as of 12:39 p.m. in New York. Volume totaled 547,932 contracts yesterday, 19 percent below the average of the past three months. Open interest was 1.52 million contracts.

- Mark Shenk in New York at Bloomberg.