Bloomberg Oil Rises More Than $2 as Equity Gains Signal Demand May Climb

April 9 (Bloomberg) -- Crude oil rose more than $2 a barrel as equities gained, signaling that some investors expect economies to stabilize, bolstering energy demand.

Oil climbed 5.8 percent after stocks advanced on better- than-estimated earnings at Wells Fargo & Co. and speculation banks will pass government stress tests. Prices were also higher after a government report showed a smaller increase in U.S. supplies than the industry indicated a day earlier.

“When equities bounce, you see oil, industrial metals and grains lift as well,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “The commodity markets are awaiting the return of global growth, and the stock market is an early signal that the economy is recovering.”

Crude oil for May delivery rose $2.86 to settle at $52.24 a barrel at 2:52 p.m. on the New York Mercantile Exchange. Prices have increased 17 percent this year.

Brent Premium

Brent is trading at a premium of $1.82 a barrel to the West Texas Intermediate contract in New York, swinging from a discount of 43 cents on March 31.

“The WTI-Brent differential does appear to us to be justified by the extreme imbalance” in inventories, Paul Horsnell, head of commodities research at Barclays Capital in London, said in a report today.

Still, Barclays is “not overly concerned about the absolute size of the crude inventory overhang,” saying cuts by OPEC will siphon off the excess.

Crude oil volume in electronic trading on the Nymex was 516,933 contracts as of 3:01 p.m. in New York. Volume totaled 727,517 contracts yesterday, the highest since March 11 and 30 percent higher than the average over the past three months. Open interest was 1.18 million contracts. more...