Fueled by a strong Election Day jump in equity markets, crude futures surged 3.6% higher Tuesday.
Analysts said there were no crude-specific headlines during the trading day that accounted for the oil rally, which was accompanied by a 3% rise in gasoline futures. The increase in oil also was joined by a 0.8% rally in the S&P 500, which typically gets a boost on Election Day.
Front-month crude for December delivery on Nymex jumped $3.06 to settle at $88.71 per barrel. Brent futures settled at $111.07, up $3.34 or 3.1%.
When crude opened Tuesday, market participants cited recent headlines about Middle Eastern tensions and greater optimism about the economic stimulus from rebuilding in the Northeast as factors behind the increase.
But as the trading day continued, oil continued to rally despite no significant oil-specific news.
"We're chasing price," said Tim Evans, an analyst at Citi Futures, who said some buyers were engaging in bargain-hunting after a recent drop in oil prices. Oil prices have receded 13.5% between Sept. 14 and Monday.
Mr. Evans said there may have been some speculation that weekly petroleum inventories could be supportive of price. On Wednesday, the U.S. Energy Department is scheduled to release its weekly inventory report.
"I have not seen anything change for the underlying fundamentals for crude," said Gene McGillian, an analyst at Tradition Energy.
Mr. McGillian said the trading on Monday helped explain Tuesday's rally. When the market couldn't sustain an oil price on Monday below $85 a barrel, there was technical pressure for the commodity to go higher, he said. Another factor in the rally was short covering, he added.
A bullish case could be made for markets regardless of whether the U.S. presidential election is won by Barack Obama or Mitt Romney, Mr. McGillian said. But markets should get a lift either way.
"Whoever wins the market is going to get a boost because the uncertainty is going to disappear," he said.
Front-month reformulated gasoline blendstock, or RBOB, settled at $2.699 a gallon, up 7.87 cents. Heating oil settled at $3.053 per gallon, up seven cents.
Copyright (c) 2012 Dow Jones & Company, Inc.
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