Crude Halts 3-Day Losing Streak, Tops $88 a Barrel
Crude oil futures snapped a three-day losing streak, rising 1.8% Thursday on hopes that Congress and the Obama administration can reach agreement to avoid the so-called "fiscal cliff."
Oil staged a full-bloom rally, again taking a lead from strength in U.S. equities, after shedding steep losses in late trading Wednesday.
Despite the gain, which erases nearly all the declines earlier this week, crude oil futures remained stuck in the $84-$90 trading range in place this month.
Light, sweet crude oil futures for January delivery on the New York Mercantile Exchange settled 1.8%, or $1.58 a barrel, higher at $88.07. The contract had shed $1.79 a barrel heading into Thursday's trading on worries over a potential sharp blow to oil demand if the U.S. didn't reach a debt deal by year-end.
ICE January Brent crude settled $1.25 higher, at $110.76 a barrel.
House Speaker John Boehner (R., Ohio) said "no substantive progress" has been made in talks between Republicans and Democrats on a deal to avoid a series of automatic tax increases and spending cuts next year. Sen. Charles Schumer (D., N.Y.) said progress had been made behind the scenes.
"Everyone is just looking at the fiscal cliff and we have been oversold here," said Carl Larry, head of Oil Outlooks and Opinions, an advisory group.
Mr. Larry said some strength in the market also came from position squaring ahead of the expiration at Friday's settlement of December-delivery contracts for heating oil and reformulated gasoline blendstock futures. Inventories are tight for both products, but demand has been weak as well.
December-delivery RBOB futures settled 1.9%, or 5.31 cents, higher at $2.7870 a gallon, the highest front-month price since Oct. 16.
Prices gained overnight after the head of the United Nation's nuclear body called for "urgent" diplomacy to halt what it says is Iran's efforts to develop nuclear weapons. Iran has maintained it is only pursuing a peaceful nuclear power program.
Diplomatic efforts to resolve the crisis over Iran's nuclear activities need to be pursued with "urgency," International Atomic Energy Agency head Yukiya Amano said at the start of a two-day meeting of the IAEA board, which will be dominated by the Iran issue.
Global sanctions on Iran have slashed its oil output by 1 million barrels a day, and dropped it from its role as the second-biggest oil producer in the Organization of the Petroleum Exporting Countries behind Saudi Arabia. By some counts, Iran has fallen to the No. 5 producer in OPEC, as other Gulf nations have raised output to cover any shortfall.
Meantime, the Commerce Department reported that preliminary third-quarter U.S. gross domestic product rose by 2.7%. That is the strongest growth since the fourth quarter of 2011, but was just below economists' forecasts of 2.8% growth.
Tim Evans, analyst at Citi Futures, noted that growth in U.S. GDP hasn't translated into stronger oil demand in the past siz quarters, due to increased efficiencies, such as higher vehicle mileage standards, and greater use of natural gas.
"There may continue to be those who will buy oil because they see GDP rising," he said. "But they are likely to be disappointed when none of that translates into stronger petroleum demand, let alone market tightness. The U.S may be the most bearish regional oil market in the world right now."
December heating oil futures prices settled 3.26 cents higher at $3.0406 a gallon, after shedding 6.9 cents in the prior three days.
Data from the Energy Information Administration on Wednesday showed distillate stocks (diesel/heating oil) were the lowest for this time of year in 30 years of government data. But the figures showed stockpiles were inching higher in the Northeast, the main heating oil consuming region.
Copyright (c) 2012 Dow Jones & Company, Inc.
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