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Crude rises for 2nd day as durable goods orders increase

West Texas Intermediate crude rose for a second day as U.S. durable goods orders gained more than forecast in May.

Futures increased 14 cents as bookings for goods meant to last at least three years climbed 3.6 percent in a Commerce Department report from Washington. Enbridge Inc., the largest transporter of Canadian crude to the United States., restarted a segment of its oil-sands pipeline system in Alberta shut after a leak that followed flooding in the region. Volume exceeded the three- month daily average for a fifth day.

“Getting better durable goods data is a sign that the economy is becoming a little bit more vibrant,” said Jacob Correll, a Louisville, Ky.-based commodity analyst at energy management firm Schneider Electric Professional Services. “Enbridge is restarting the pipeline and it makes sense why we would see more weakness in prices.”

WTI for August delivery settled at $95.32 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 37 percent higher than the 100-day average for the time of day. Prices have slipped 2 percent this quarter, curbing the gain in 2013 to 3.7 percent.

Brent for August settlement increased 10 cents to end the session at $101.26 a barrel on the London-based ICE Futures Europe exchange. Volume was 26 percent below the 100-day average. Brent’s premium to WTI shrank to $5.94, the least since January 2011.

WTI-brent

“The spread has been very volatile over the last few days,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “We’ve had a huge move in the spread and a lot of what we’re seeing today is due to it coming in too much.”

Excluding transportation equipment, where demand is volatile month to month, durable orders advanced 0.7 percent, also topping projections, Labor Department data showed.

The median forecast of economists surveyed by Bloomberg had called for a 3 percent increase in total orders.

The United States, the world’s biggest oil-consuming country, accounted for about a fifth of global demand last year, according to BP Plc’s Statistical Review of World Energy.

“Durable goods orders were better than expected and that did give oil demand aspect a boost,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The anticipation that the Enbridge pipeline is coming back is putting pressure on WTI.”

Enbridge pipelines

Enbridge restored operations on the southern segment of the Athabasca pipeline network and said that it will restart other lines over the next several days, according to a company statement yesterday.

Enbridge, based in Calgary, shut the Athabasca and Waupisoo systems, which have total capacity to move as much as 1.17 million barrels a day, after finding a 750-barrel spill on June 22 from Line 37, a link serving Nexen’s Long Lake oil-sands complex. The incident was related to severe flooding in Alberta last week. Oil jumped 1.6 percent Monday on news of the pipeline shutdown.

Enbridge needs to provide a plan for its shut line to the Alberta Energy Regulator, Darin Barter, spokesman for the agency, said by e-mail today.

“People tend to jump at things like news about pipelines,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass.

The dollar strengthened as much as 0.4 percent to $1.3065 per euro after the better-than-expected durable goods data. A stronger dollar reduces oil’s appeal as an investment alternative.

“The dollar is strengthening and it’s putting pressure on oil,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago.

Crude supplies

Crude inventories probably shrank by 1.75 million barrels last week to 392.4 million as refiners boosted gasoline production to meet rising demand, a Bloomberg survey showed. The government is scheduled to release its weekly petroleum report Wednesday.

“There are expectations that you are going to see a draw in crude stocks,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Conn. “It looks like oil wants to go higher right now.”

World oil demand will rise in the second half of this year as economic growth continues to recover, Goldman Sachs Group Inc. (NYSE: GS) said Tuesday.

“Global demand is picking up,” Stefan Wieler, a Goldman Sachs commodity analyst in New York, said in an e-mailed report. “We expect fundamentals to improve further going into the second half of 2013.”

Implied volatility for at-the-money WTI options expiring in August was 21 percent, down from 22.2 percent Monday, data compiled by Bloomberg showed.

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