http://www.marketwatch.com/story/crude-oil-slumps-ahead-of-economic-data-2010-06-02

SAN FRANCISCO (MarketWatch) -- Crude-oil futures rose Wednesday as some of the concern about demand for energy products in the U.S. dissipated after a better-than-anticipated report on home sales, strong auto sales numbers, and a recovery for U.S. stocks.

Crude oil for July delivery, the most active contract, rose 28 cents, or 0.4%, to $72.86 a barrel on the New York Mercantile Exchange.

"People are starting to get back to commodities," said Carl Larry, president of Oil Outlooks & Opinions in Houston, Tex.

Energy futures got a little boost from U.S. stocks moving higher, as well as a rise in pending home sales index by 6% in April after an upwardly revised 7.1% increase in March.

Larry also cited good auto sales as a positive factor for reformulated gasoline futures. Gasoline for July delivery added 4 cents, or 2.2%, to $2.02 per gallon.

Several automakers, including American brands such as General Motors Co.(MTLQQ 0.53, 0.00, 0.00%) and Ford Motor Co. (F 12.05, +0.20, +1.69%), reported double-digit gains on Wednesday. See full story on auto sales.

The overall picture for energy products, however, is still bearish, said analysts. Oil made a couple of short-lived forays into negative territory in early trading Wednesday.

"You have a little support from stocks, but I don't see much improvement in demand ... and we are still oversupplied," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

Prices for further-out contracts are trading at a premium, a price structure known as contango. That's "a bearish signal," Ritterbusch said.

Crude oil for August delivery added 60 cents, or 0.8%, at $74.50 a barrel.

In currency trading, the dollar made gains, particularly against Japan's yen. The dollar index (DXY 86.76, -0.03, -0.04%), which compares the greenback to a basket of six currencies, rose 0.1% to 86.75, moderating some of its recent gains.

Oil traders will be paying attention to Friday's job report, Larry said. For prices to turn higher more decisively, "we just need word that America is back at work again," he said.

Further signs of improvement in developed-world oil demand emerged with the latest Japanese figures for April placing oil demand at 3.95 million barrels a day, a slow down from March but a on-year increase of 3%, analysts at Barclays said.

Supply data ahead

News from the supply side also may sway the market in coming days.

The American Petroleum Institute, a Washington-based trade group, reported late Wednesday a deeper than expected decline in oil stockpiles in the week ended May 28.

Crude-oil stockpiles declined 1.4 million barrels, the API reported. Gasoline inventories declined by 962,000 barrels, it said. Stocks of distillates, which include heating oil and diesel, increased by 852,000 barrels.

The more closely watched Energy Department's report on oil inventories is slated for release Thursday at 11 a.m. Eastern, a day later than its regular schedule due to Monday's Memorial Day holiday.

Analysts polled by Platts expect crude stockpiles to decline 1 million barrels. Gasoline stocks are expected to increase 750,000 barrels, while distillates stocks are estimated to increase by 950,000 barrels.

The DOE's Energy Information Administration is scheduled to release its data on natural gas in storage on Thursday at 10:30 a.m. Eastern.

Natural gas jumps

Natural gas for July delivery added 18 cents, or 4.1%, to settle at $4.42 per million British thermal units, the highest price for a most-active contract since May 18, according to FactSet.

Analysts surveyed by Platts see an increase between 90 to 94 billion cubic feet in the U.S. storages of natural gas for the week ended May 28.

"Natural gas ... is weighing the balance of risks between an early arrival of hot weather and calls for an active hurricane season against a continued outlook for production growth," analysts at Barclays said in a note to clients Wednesday.

Claudia Assis is a San Francisco-based reporter for MarketWatch.