Crude-oil futures prices settled at a fresh three-month high above $95 a barrel Thursday afternoon, extending to a third day a rally spurred by concerns over tightening supplies.
Nymex September-delivery crude oil settled $1.27 higher at $95.60 a barrel, the highest price since May 11. In recent days, the price has been hitting three-month highs.
Traders said Thursday's intraday move above the $95 level for the first since mid-May, after a sluggish start to trading, was fueled by position adjustments ahead of the expiration of September crude-oil options at the end of trading on the New York Mercantile Exchange.
Crude-oil and products prices have rallied in recent days on signs of tightening supplies, caused in part by operating snags at several refineries.
Spill-over from lofty gains in North Sea Brent crude oil prices, where field maintenance is trimming near-term supplies, and heightened tensions in the Middle East also underpinned prices.
On the Intercontinental Exchange, North Sea Brent crude oil for September went off the board Thursday, at $116.50 a barrel, the highest price since May 2 and up 65 cents on the day. Since it began trading as the front-month contract in mid-July, the contract gained more than 12%, or nearly $13 a barrel, on lower output due to maintenance and operational snags. October Brent settled 96 cents higher, at $115.27 a barrel.
"To me, it's a supply-driven rally," rather than a sign of stronger demand, said Andy Lebow, senior vice president of energy futures at Jefferies Bache in New York. "People are buying, but they don't think the economy is improving, they're speculating on the geopolitics and looking at the numbers," including U.S. oil inventory data, which showed larger-than-expected declines in U.S. crude-oil and gasoline stocks, he said.
The Energy Information Administration, while reporting a bigger-than-expected drop in weekly crude-oil and gasoline stocks Wednesday, also said there was a sharp jump in implied U.S. oil demand in the week, which also added to the rally.
"It's probably just a one-week aberration, but if you're a bull, that's a bit of fresh air," said Kyle Cooper, managing partner at IAF Advisors in Houston.
Tensions caused by the conflict in Syria have spilled into Lebanon, causing Saudi Arabia and other Gulf states to order their citizens to leave that nation, while market nerves remain on edge as to how the continuing issue of tighter international sanctions on Iran will play out. Iran, the second-biggest oil exporter in the Organization of Petroleum Exporting Countries, has seen a sharp drop in its output due to embargoed oil sales, while others in OPEC have raised output to cover any shortfall.
Despite the surprise decline of 3.7 million barrels in crude oil stocks reported last week by the EIA, inventories remain above five-year average levels relative to refiner demand for crude, analysts noted.
Gasoline and distillate supplies are tight in the Northeast U.S., but analysts said there is potential for fuel to be diverted to the region, rather than exported, to cover any supply shortfalls, and more imports also are expected.
"We're still seeing a mixed and muddled economic picture," Mr. Cooper said. "The Philly Fed numbers were pretty bad," he added, referring to the Federal Reserve Bank of Philadelphia's business index coming in at -7.1, better than the -12.9 reading in July but below the -6.5 expectation. The discouraging report follows a sharp drop reported Wednesday in a similar survey conducted for the New York region.
The EIA data showed implied U.S. oil demand of more than 20 million barrels last week, the highest level since November and up 3.2% from a year ago, well above the trend this year. Before the week's figure, demand hadn't topped 19.6 million barrels a day in any week, putting 2012 on track to record the lowest weekly oil demand peak since 1996.
The jump in the demand last week was largely due to a sharp rise in other oils, a catch-all category grouping lesser-used products, which is based on estimates, rather than actual data collection. The EIA has long cautioned against reading too much into a single week's data and notes the running four-week demand edits out noise in the weekly figures.
Demand for the four weeks to Aug. 10 was 19.3 million barrels a day, off 0.7% from a year earlier, the EIA reported.
September RBOB gasoline futures settled 0.08 cent lower, at $3.0832 a gallon, after settling Wednesday at the highest level since May 1 and rising 3.1% over the previous two days.
September heating oil futures shed early declines to settle 1.2%, or 3.77 cents, higher, at $3.1229 a gallon, the highest level since May 2. The contract rose 3.5%, or 10.46 cents, over the last three trading days.
Copyright (c) 2012 Dow Jones & Company, Inc.
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