Oil prices rise on improvement in US manufacturing

AP News
Posted: May 01, 2012 3:55 PM
Oil prices rise on improvement in US manufacturing

Oil prices rose Tuesday after growth in the U.S. and Chinese manufacturing sectors signaled more demand for energy products.

The improvement for the world's two largest economies offered some relief from persistent worries about the slowdown in Europe.

Benchmark crude rose $1.29 to finish at $106.16 per barrel in New York. That's the highest settlement price since it hit $106 on March 28. Brent crude increased 19 cents to $119.66 per barrel in London.

Separately, natural gas prices rose for a third day on hopes that the glut of inventory could shrink. The government said Monday that overall production fell 0.8 percent to 82.36 billion cubic feet per day in February from the previous month. Weekly storage data is due out Thursday. It's likely to show the nation's supplies are still well above average for this time of year.

Natural gas ended up 8.6 cents at $2.371 per 1,000 cubic feet.

The Institute for Supply Management, a trade group of purchasing managers, said that its index of U.S. manufacturing activity increased to 54.8 in April, the highest level since June. That compared with 53.4 the previous month. Readings above 50 indicate expansion. New orders, new export orders, production and a measure of employment all rose.

Manufacturing has been expanding for 33 consecutive months, which has helped create jobs since the recession ended three years ago in the U.S.

In China a purchasing managers index for April also rose. The improvement comes after the world's second-largest economy slowed late last year. Chinese leaders promised more bank lending to help companies cope with slower global demand, but changes have been gradual.

Uncertainty about what lies ahead for Europe's economy continues to overhang the market as well, said Tom Bentz, an analyst at BNP Paribas Commodity Futures. He doesn't expect significant movement in oil prices until a strong trend materializes.

Meanwhile, retail gas prices continued to fall, and most analysts believe consumers already have seen the highest prices for 2012.

The national average for a gallon of gasoline fell about 1 cent overnight to $3.809, according to AAA, Wright Express and the Oil Price Information Service. That's 11.6 cents less than it was a month ago and 13.4 cents less than a year ago.

Energy analyst Jim Ritterbusch said that demand remains weak because consumers continue to cut back on driving and buying gas with prices still high.

In other energy trading, heating oil fell 0.71 cent to end at $3.1771 per gallon and gasoline futures fell 2.75 cents to finish at $3.0971 per gallon.