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Oil Rises 2 Percent to Snap Four-Day Skid

Tuesday, 27 Sep 2011 10:21 AM

Oil jumped more than 2 percent on Tuesday, snapping a four-day losing streak on efforts to strengthen the eurozone rescue fund and concerns about fuel supplies.

European officials were seen considering plans to boost the size of the region's bailout fund and to recapitalize banks, sparking hopes of an easing in the debt crisis that has dragged stock markets and commodities this month.

Equities rose and commodities gained, with gold also shaking off four days of declines. End-of-quarter and technical buying also provided lift.

"What we might be seeing is some end-of-the-quarter bookmarking," Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.

"Right now the (U.S. crude futures) market may have triggered some technical buying at the $80 level, I think this is a technically oriented rally with some end-of-the-quarter buying supporting it."

RBOB gasoline futures led the oil complex higher, rising more than 4 percent on news ConocoPhillips would sell or idle its Trainer, Pennsylvania plant and a snag at a Louisiana refinery.

Brent futures rose $2.36 to $106.30 a barrel at 1:49 p.m. EDT, after touching a session high $107.05.

U.S. crude showed even stronger gains, up $3.67 to $83.91 a barrel.

Brent volumes, which have traditionally been lower those for U.S. futures, again outpaced those of the U.S. contract.

The rising activity in Brent compared to the New York Mercantile Exchange's U.S. contract could be tied to traders anticipating large, long-only index commodity funds will increase their 2012 holdings in Brent relative to U.S. futures, analysts said.

The U.S. contract has come under pressure this year as rising volumes of crude from Canada flood into the U.S. Midcontinent, especially the Cushing, Oklahoma delivery point for the NYMEX contract.

"The NYMEX is just such a false indicator of where demand is and where the real price of oil is, the Brent market is well over $100 and the NYMEX is just completely detached," said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.

"I would expect to see an increase in Brent and a decrease in NYMEX (by long-only index funds)."

In early afternoon activity in New York, nearly 500,000 Brent contracts had changed hands, just below the 30 day average, while only 353,000 contracts traded on the New York Mercantile Exchange's U.S. contract, about 46 percent below that average.

REFINERY SUPPORT

Further support came from concerns about gasoline supplies, after news Motiva Enterprise MOTIV.UL shut down a cat cracker at its 235,000 barrel per day (bpd) Norco, Louisiana refinery, which lifted RBOB gasoline futures.

In addition, ConocoPhillips announced it would put its 185,000 barrel per day Trainer, Pennsylvania refinery on the block.

The U.S. major has already started to idle the plant, and will close it permanently if a buyer is not found within six months, the latest East Coast refinery looking to get out of the region due after poor margins have caused a wave of sell offs and closures that threaten regional supplies.

EYES ON LIBYA, US INVENTORIES

The premium paid for Brent over U.S. crude narrowed to below $23 a barrel as traders focused on the return of crude supply from Libya. The country's port authority chief told Reuters the OPEC nation had shipped its first crude cargo from the eastern port of Marsa el Hariga on September 25, bound for Italy.

The loss of Libyan crude, a key feedstock for Italian refiners, helped widen Brent's premium to U.S. crude to record levels over $27 a barrel this month.

Ahead of weekly inventory data from the American Petroleum Institute later Tuesday, analysts polled by Reuters forecast a small draw in crude oil inventories and a build in refined product stockpiles.

Stocks data from the U.S. Energy Information Administration, which last week showed U.S. crude oil inventories fell to the lowest level since January, are due out on Wednesday.

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Oil jumped more than 2 percent on Tuesday, snapping a four-day losing streak on efforts to strengthen the eurozone rescue fund and concerns about fuel supplies. European officials were seen considering plans to boost the size of the region's bailout fund and to...
Oil,Prices,crude
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2011-21-27
Tuesday, 27 Sep 2011 10:21 AM
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