Oil futures settle higher on upbeat US data, South Sudan conflict

West Texas Intermediate crude settled near the highest level in two months while Brent touched a three-week high as another series of upbeat economic data from the US boosted demand prospects in the worlds top consumer. The market also gained support as escalating violence in South Sudan curbed the nations oil output, adding to recurring outages from Libya, holder of Africas biggest crude reserves.

On the New York Mercantile Exchange, WTI crude for settlement in February closed at $99.22 per barrel on Tuesday. Prices jumped 2.8% last week and are up 7% this month, marking an 8.1% annual advance. Nymex floor trading will be closed today and reopen on December 26th.

Meanwhile on the ICE, Brent futures for delivery in February rose by 0.3% to $111.90 per barrel, widening its premium to WTI to $12.68 a barrel. The European benchmark rose by 2.7% last week and is up 1.7% on a monthly basis.

Oil prices continued to edge higher after another batch of unexpectedly upbeat data from the US added to recent positive numbers and backed policy makers decision to trim Feds monthly bond purchases.

The Commerce Department reported on Tuesday that bookings for goods meant to last more than three years surged 3.5% in November, sharply exceeding projections for a 2.0% advance. Octobers reading received an upward revision to show a 0.7% decline, up from initially estimated at -2.0%.

Core durable goods orders, which exclude the volatile transportation items such as aircrafts, jumped by 1.2% last month, defying analysts forecasts for a moderate growth of 0.6%. The previous months reading was revised up to 0.7% from previously estimated at -0.1%.

A separate report by the Commerce Department showed that purchases of new US homes surpassed analysts forecasts and remained near the highest level in five years, signaling the housing market retained momentum despite the rise in mortgage rates. New Homes Sales reached a 464 000 annualized pace, beating analysts projections for a drop to 435 000. Octobers reading received an upward revision to 474 000, correcting the initial estimate of 444 000 homes sold.

Month-on-month, purchases of new US homes fell by 2.1%, compared to forecasts for a 2.0% drop, following the previous periods 17.6% jump.

Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said, cited by Bloomberg: “The two good economic indicators suggest that the grip of the recovery is tightening. This should mean more oil demand next year.”

This comes after a private survey showed on Monday that consumer confidence in the world’s largest economy rose to the highest in 5 months in December, reflecting the improvement in the labor market and overall activity. The final reading of the Thomson Reuters/University of Michigan consumer sentiment index confirmed the preliminary estimate and touched a five-month high of 82.5, despite trailing expectations for a rise to 83.0.

Christine Lagarde, the International Monetary Fund’s managing director, said last week the IMF is raising its outlook for the US economy as the reduction in Fed’s bond purchases and a budget deal in Washington eased concerns that the US economic growth might not be sustainable.

Market players will also be keeping a close watch on this weeks inventories data by the EIA, due to be released on Friday. According to a weekly Bloomberg survey of analysts prior to the government report, crude inventories are expected to have fallen for a fourth straight week by 2.3 million barrels in the seven days to December 20. Motor gasoline stockpiles likely jumped by 1.1 million barrels while distillate fuel supplies may have decreased by 1 million, the survey showed.

Supply concern

The oil market, and especially the Brent benchmark, gained support as the ongoing conflict in South Sudan threatened the countrys output. Fighting in South Sudan has killed at least 500 people, forcing the government to evacuate oil workers. The countrys main investor China National Petroleum Company evacuated earlier its employees to the capital Juba.

Rebel forces loyal to former Vice President Riek Machar said they captured the Unity state, a crude-producing region, which led to a loss of capacity amounting to 45 000 barrels per day and brought nationwide production to 200 000 bpd. At the same time, Libyas crude production continued to be off by more than 1 million bpd as the government failed to negotiate with rebel leaders the reopening of key export terminals in eastern Libya.