Oil futures ended higher Monday in a late-session rally led by Europe's benchmark contract, as Middle East tensions overshadowed the coming U.S. presidential election.
Light, sweet crude for December delivery settled 79 cents, or 0.9%, higher at $85.65 a barrel on the New York Mercantile Exchange. Europe's Brent crude on ICE Futures Europe settled $2.05, or 1.9%, higher at $107.73 a barrel.
Traders and analysts scrambled to assess the late-day move, with some pointing to reports of fresh tensions in the Middle East as propping up the European contract. The Associated Press reported Monday that two border guards were killed in fighting against al-Qaida militants on the Yemeni border.
Meanwhile, the U.N.'s atomic energy watchdog said Iran was still resisting efforts aimed at persuading it to give up more information on its nuclear efforts. Such efforts are yielding "no concrete results," the head of the International Atomic Energy Agency said.
"That seems like a fairly bullish headline, if there's still not going to be any progress," said Peter Donovan, vice president at Vantage Trading, an oil options brokerage in New York.
Others said the move seemed aimed at closing out some recent aggressive bets on lower prices that have entered the market in recent weeks. Money managers slashed their so-called net long position in Nymex crude by 11% in the most recent week, regulators said Friday.
"Whenever I see the [data] get that bearish, we get a pop," said John Kilduff, founding partner at commodities trading firm Again Capital.
Futures had spent most of the session relatively unchanged, as investors appeared hesitant to lay big bets ahead of the U.S. presidential election. Traders say they don't expect the outcome to affect supply or demand much in the near term, but the race has left them cautious. Polls show a dead heat between President Barack Obama and Governor Mitt Romney.
The Wall Street Journal/NBC News poll showed Mr. Obama leading 48% to 47%, within the margin of error.
"The problem is now we've got the election tomorrow," said Rich Ilczyszyn, chief market strategist at iiTrader, a Chicago futures brokerage. "I can't imagine anyone levering up here."
Monday's move is the latest volatile day in the oil and fuel markets after Sandy led to gasoline shortages in the New York area and the release of emergency diesel stockpiles. Oil and gasoline futures are near four-month lows as many analysts predict the storm will curb demand.
Front-month December reformulated gasoline blendstock, or RBOB, settled 4.66 cents, or 1.8%, higher at $2.6202 a gallon. December heating oil settled 3.55 cents, or 1.2%, higher at $2.9829 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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