Brent crude up 2 percent on Europe moves, strong diesel | 9.15.11
Brent crude up 2 percent on Europe moves, strong diesel
By David Sheppard
NEW YORK | Thu Sep 15, 2011 3:51pm EDT
(Reuters) - Brent crude jumped by almost $3 to above $115 a barrel on Thursday after central banks launched coordinated action to boost European bank funding and as diesel and heating fuels rallied.
News that major central banks around the world will cooperate to prevent Europe's sovereign debt crisis from freezing up money markets was seen as a positive step toward stopping another recession.
Industrial fuels like diesel and heating oil rallied about 3 percent on expectations demand would keep growing strongly.
JP Morgan analyst Lawrence Eagles said inventories of diesel and heating oil in the United States will probably be drawn down in the coming months by international demand.
"Commodities have been in direct correlation to quantitative easing," said Keith Springer, President of Springer Financial Advisors in Sacramento, California and author of Facing Goliath: How to Triumph in the Dangerous Market Ahead.
"Distillate stocks will likely tighten, poised to draw by 4 million barrels over the next four months despite refineries cranking up output to all-time highs," Eagles said.
"We see the strong trend in exports that has already depleted inventories continuing."
October Brent crude, which expired on Thursday, traded up $2.94 to $115.34 a barrel, hitting a week high and moving above its 50 and 100-day moving averages. The more heavily traded November contract gained $2.65 to settle at $112.30 a barrel.
U.S. crude oil for October rose 49 cents to settle at $89.40.
U.S. heating oil futures rose 2.7 percent, while RBOB gasoline futures were up 2.1 percent. Gas oil futures, the main distillate contract in Europe, gained 3 percent.
Brent's premium to U.S. crude widened by more than $2 to approach $26. It had narrowed sharply earlier in the week as part of a sell-off in the spread.
"I think this week is set up for the classic exit strategy for somebody who had a big position in October Brent," said Richard Ilczyszyn, senior market strategist for MF Global in Chicago, adding that investors may now have shifted into long December Brent positions while going short contracts for December U.S. oil futures.
Weak U.S. economic data capped price gains. The number of Americans filing new claims for jobless benefits rose unexpectedly last week. Business activity in the U.S. mid-Atlantic region dropped in August for a second month, the Philadelphia Federal Reserve Bank said.
The weak data could add urgency for the Federal Reserve to give the economy a boost. Chairman Ben Bernanke and colleagues plan to take an extra day at their policy review next week.
Many economists expect the Fed to unveil new measures to lift growth when the meeting concludes on Wednesday.
Many market watchers said the Fed's program of bond purchases through June 30, known as quantitative easing or QE2, helped drive up commodity prices by providing cheap money to investors who placed it in risky assets.
MIDDLE EAST TENSIONS
Oil traders said prices also received support from heightened tensions between Turkey and Israel, two of the biggest powers in the Middle East.
Turkish Prime Minister Tayyip Erdogan said Turkish warships could be sent to the Eastern Mediterranean escalating a war of words over the 2010 killing of Turkish activists.
In Libya, Benghazi-based oil firm Agoco is seeking to import up to 765,000 barrels of gasoline in the first half of October, according to traders.
While the Libyan National Transitional Council is working to restore pre-civil war crude output of 1.6 million barrels per day, analysts have said pent-up demand for fuel imports may tighten the Mediterranean oil market in the short-term.
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