Oil Near One-Week High as Fed Sees U.S. Economy Growing

Oil traded near the highest level in a week after Federal Reserve policy makers said they expect growth to accelerate, boosting speculation fuel demand will rise. Iran said it may halt its nuclear expansion.

Futures were little changed in New York after gaining 0.6 percent yesterday. Economic growth is expected to “remain moderate over coming quarters and then to pick up gradually,” the Federal Open Market Committee said in a statement. Prices declined earlier after U.S. supplies gained more than forecast and Iran’s envoy in Moscow said his country may halt the expansion of its atomic program to avert new Western sanctions.

“The FOMC moderately upgraded their growth estimates which reinforced the general view the market is operating on, that you will see a solid demand outlook from the U.S.,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. The reaction to the Iran report “reflects the fact that traders and investors putting their money on the line want to see far more compelling evidence that it was actually happening,” he said.

Crude for June delivery was at $104.11 a barrel, down 1 cent, in electronic trading on the New York Mercantile Exchange at 3:06 p.m. Singapore time. The contract yesterday rose 57 cents to $104.12, the highest close since April 17. Front-month futures have climbed for four days, the longest winning streak in two months. Prices are 5.3 percent higher this year.

Brent oil for June settlement was at $118.87 a barrel, down 25 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s front month premium to West Texas Intermediate was at $14.76, from $15 yesterday.

Technical Resistance

Oil’s gain in New York is stalling as futures approach technical resistance along the top of a downtrend channel going back about two months, according to data compiled by Bloomberg. This level is around $104.23 a barrel today. Sell orders tend to be clustered near chart-resistance levels.

Prices will stay above $100 a barrel even as economic growth slows, according to Mirae Asset Securities Ltd.

“While we still expect oil prices to soften, we don’t see a collapse scenario,” Gordon Kwan, head of regional energy research at Mirae Asset in Hong Kong, said in a report e-mailed today. “Mirae continues to believe that the $100 a barrel oil price is here to stay.”

Crude has climbed this year amid speculation that tension with Iran over its nuclear program may disrupt Middle East supplies. The Islamic Republic is considering a Russian proposal to stop building centrifuges, or machines used to enrich uranium, and mothball ones that haven’t been put into use yet, Iranian Ambassador Mahmoud-Reza Sajjadi said in Moscow yesterday.

Japan Crude Imports

Efforts to resolve the dispute will be complicated if the European Union goes ahead with an embargo on the nation’s petroleum exports from July 1, Sajjadi said.

Separately, Japan said its crude imports from Iran fell 6.3 percent in March from a year ago. Purchases were 1.8 million kiloliters, compared with 1.9 million kiloliters in March 2011, according to data today from the Ministry of Finance. Imports climbed from 1.2 million kiloliters in February.

U.S. crude inventories rose 3.98 million barrels to 373 million last week as output climbed to a 12-year high, according to the Energy Department. They were projected to increase 2.8 million barrels, according to the median of 11 analyst estimates in a Bloomberg survey.

Stockpiles of gasoline decreased 2.2 million barrels, Energy Department data showed. They were forecast to fall 1.5 million barrels, the survey shows. Distillate supplies, a category that includes heating oil and diesel, dropped 3.1 million compared with an estimated 500,000 barrel gain.

Gasoline slid for the eighth time in nine days after the report showed deliveries to wholesalers dropped 3.2 percent to a five-week low. Prices for May delivery fell 0.36 cent to $3.1557 a gallon on the New York Mercantile Exchange yesterday.

Bloomberg