Oil advanced on optimism that Europe’s debt crisis is easing and speculation that the Federal Reserve will announce a package to boost the U.S. economy.
Prices rose as much as 1.4 percent as Spain sold 3.04 billion euros ($3.8 billion) of bills, exceeding a target of 3 billion. Greek politicians may agree today to form a government and to seek relief from austerity measures imposed as a condition for bailout loans, probable coalition partners said. The Federal Reserve is meeting today and Wednesday.
“Whenever Europe looks a little bit more stable, it’s going to be helpful to the market,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “We’ve got the Fed decision tomorrow and there is some anticipation of additional accommodative policy.”
Oil for July delivery, which expires Wednesday, rose 85 cents, or 1 percent, to $84.12 a barrel at 9:59 a.m. on the New York Mercantile Exchange. The more actively traded August contract rose 84 cents, or 1 percent, to $84.44.
Brent oil for August settlement gained 44 cents, or 0.5 percent, to $96.49 a barrel on the London-based ICE Futures Europe exchange. Earlier it fell to $94.44, the lowest level since January 2011.
Spain also sold 639.3 million euros of 18-month debt, the Madrid-based Bank of Spain said today. Demand for Spain’s 12- month bills was 2.16 times the amount offered, compared with 1.84 last month. The bid-to-cover ratio on the 18-month securities rose to 4.42 from 3.23.
Greek election winner, New Democracy’s Antonis Samaras, begins a second day of talks to form a coalition after holding “constructive” meetings with two party leaders, racing to forge a government that keeps bailout aid flowing.
Once the Greek government is formed, representatives of the so-called troika of the EU, the International Monetary Fund, and the European Central Bank will travel to Athens and will evaluate requests for adaptations in the aid program, a European Union official told reporters on condition of anonymity in Brussels.
“You are seeing some optimism coming out of Europe,” said Phil Streible, a Chicago-based commodities broker at RJO Futures. “There is little chance that Greece will exit the euro zone and that’s helping the market.”
The euro gained as much as 0.6 percent against the dollar. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.
The Federal Reserve’s Open Market Committee, which sets the course of central bank policy, will decide whether more monetary stimulus is needed to boost growth as the labor market stumbles and risks from Europe’s sovereign debt crisis rise.
Oil also rose as U.S. crude inventories probably declined for a third week as refineries operated at the highest rate in almost five years, a Bloomberg survey showed.
Stockpiles dropped 1.28 million barrels, or 0.3 percent, to 383.2 million last week, according to the median of eight analyst estimates before an Energy Department report Wednesday.
Oil reduced gains earlier after a report showed builders in the U.S. broke ground on fewer homes than forecast. Housing starts dropped 4.8 percent to an annual rate of 708,000. Building permits, a proxy for future construction, climbed to the highest level since September 2008.