West Texas Intermediate crude rose from the lowest level in one month as the U.S. dollar weakened against a basket of major currencies after a report showed U.S. manufacturing contracted last month.
Crude gained as the Dollar Index fell as much as 0.5 percent, raising the investment appeal of commodities priced in the currency. Manufacturing in the U.S. contracted in May at the fastest pace in four years, according to the Institute for Supply Management. A European factory gauge climbed. Crude also rose as U.S. stocks rebounded from a three-week low.
“Oil is moving with currencies,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “Prices are stabilizing after Friday’s drop. There was some solid data out of Europe and that helped.”
WTI crude for July delivery gained $1.33, or 1.5 percent, to $93.30 a barrel at 10:15 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 5 percent below the 100-day average for the time of day. The futures ended at $91.97 on May 31, the lowest settlement since May 1. Prices slid 1.6 percent in May.
Brent oil for July settlement rose $1.92, or 1.9 percent, to $102.31 a barrel on the London-based ICE Futures Europe exchange after closing May 31 at the lowest settlement since May 1. Volume for all contracts was 29 percent above the 100-day average.
The Dollar Index, which tracks the U.S. currency against those of six major trading partners, was down 0.4 percent. The index is up 4 percent in 2013.
Manufacturing Contracts
The Institute for Supply Management’s factory index fell to 49 in May from the prior month’s 50.7, the Tempe, Arizona-based group’s report showed today. Fifty is the dividing line between growth and contraction, and last month’s reading was the lowest since June 2009. The median forecast of 81 economists surveyed by Bloomberg was 51.
A gauge of manufacturing (NAPMPMI) in the 17-nation euro area increased to 48.3 last month from 46.7 in April, London-based Markit Economics said today. The gauge has been below 50, indicating contraction, since July 2011.
“The European data was pretty good,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
The Dow Jones Industrial Average rose 0.3 percent today after falling 1.4 percent on May 31.
China Data
Oil dropped as much as 0.8 percent earlier as China’s official Purchasing Managers’ Index for smaller companies fell to 47.3 in May from 47.6 the previous month, even as the broader gauge rose to 50.8 from 50.6.
“Financial markets are higher today and oil seems to want to head right back to $94,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is shrugging off China’s manufacturing data.”
JPMorgan cut its forecast for Brent to an average of $113 a barrel in the third quarter, from $120 previously, according to a May 31 report received by e-mail today. The bank reduced its outlook for the three months ended December to $117, from $120, and for 2014 to $117.50, from $122.50. JPMorgan cited demand weakness in Europe and emerging markets and growing non-OPEC supply.
