Oil up on US economy; heat wave lifts natural gas

06 28, 2012 by The Associated Press

Upbeat U.S. economic news boosted the price of oil Wednesday, while scorching temperatures lifted natural gas to its highest level in more than five months.

Benchmark crude rose 85 cents to $80.21 per barrel in New York. Brent crude, which is used to price international varieties of oil, gained 48 cents to $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 U.S.

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, U.S. 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 $2.774 per 1,000 cubic feet. That's the highest closing price since Jan. 11. It rose as high as $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 U.S., 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.

At the pump, the national average for retail gasoline fell 1.4 cents overnight to $3.383 per gallon, according to auto club AAA, Wright Express and the Oil Price Information Service. That's nearly 26 cents less than a month ago.

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 $2.5937 per gallon and wholesale gasoline fell 2.47 cents to $2.62 per gallon.