Crude-Oil Futures Climb to 19-Week High; Gasoline Futures Rally for 8th Day

NEW YORK--Crude-oil futures prices posted modest gains Monday, settling at a 19-week high, while concerns over tight mid-Atlantic gasoline supplies pushed futures up for an eighth straight day.

Oil futures climbed early as the Commerce Department said December U.S. durable goods orders rose 4.6% from November, much stronger than the consensus call for a 2% rise. The data is the latest of recent strong indicators of a recovery in the U.S., the world's biggest oil consumer.

But after sluggish data on home sales and weakness in the broader equities market, crude turned down before regaining traction to tick up to a fresh high after failing to hold gains above $96 a barrel in the three prior sessions.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled up 56 cents at $96.44 a barrel, but off from its session high of $96.81 a barrel. The modest gain was enough to push crude to its highest settlement since Sept. 18, but traders said the path to further gains may not be smooth.

ICE North Sea Brent for March delivery settled up 20 cents at $113.48 a barrel, the highest price since Oct. 16.

"We've been gaining on signs of an economy recovery," which would spark higher demand for oil, said Carl Larry, president of Oil Outlooks and Opinions. Prospects for more gains are on hold until the market gets a read on U.S. oil inventory data, the view from the Federal Reserve's policy-making board, and the January nonfarm payrolls report.

Mr. Larry said crude oil prices, with the $97-a-barrel level in sight, may be poised to challenge $100 a barrel next week for the first time since May if the payroll report due Friday is supportive and heavy refinery maintenance work doesn't create a glut of crude oil in inventories.

Refiners last week cut crude oil processing rates to a 30-month low and sustained declines are expected.

Traders will be watching U.S. oil inventory data due at midweek to show the scope of inventory gains and refinery operations.

"If we don't get a big crude build, we will be going higher. That's the X factor here. It's all about the refineries," Mr. Larry said. He expects crude oil stocks to rise by 1.75 million barrels, which is at the low end of early forecasts.

Analysts surveyed by Dow Jones Newswires expect crude stocks to rise by 2.5 million barrels, with refinery operations inching up 0.1 percentage point from a 10-month low last week amid what is expected a busy quarter for seasonal maintenance work.

Jim Ritterbusch, president of Ritterbusch & Associates, said he sees crude struggling to hold above $96 in the near term due to reduced refiner demand. He estimated that first-quarter maintenance work could cut crude processing by about 9% to 10% of capacity, compared with a 7% in the first quarter of 2008, a period of heavy shutdowns. That would translate to around 1.6 million to 1.7 million barrels a day of crude capacity off line.

Concerns that refinery maintenance will further tighten gasoline inventories in the heavily populated mid-Atlantic region have thrust reformulated gasoline blendstock futures into the spotlight at a time when gasoline demand is the weakest of the year.

Heavy maintenance is expected to reduce gasoline production and tighten inventories. Gasoline stocks are high nationwide, but in the mid-Atlantic region, which includes the New York Harbor delivery point of the Nymex contract, they are nearly 15% below their five-year average level for this time of year, government data show.

Inventories were slim before Hurricane Sandy disrupted operations at refineries and terminals in the region, and haven't rebounded.

The specter for tighter-still supplies increased on Monday, when Hess Corp. said it will permanently shut its small Port Reading, N.J., refinery by the end of February. Energy Department data show the plant produces 27,000 barrels a day of gasoline, a fraction of the three million barrels a day or so consumed along the entire East Coast. Still, traders said, the closure will increase the need for imports to the region.

Gasoline prices in the mid-Atlantic region are among the highest in the nation, in part because crude imports in the region are tied to the price of internationally traded Brent crude oil, rather than abundant crude oil supplies in the Midwest, which keep prices down.

February-delivery contracts for reformulated gasoline blendstock futures settled 5.94 cents higher, or 2.1%, at $2.9348 a gallon, the highest price since Oct. 11. Prices have rallied 8.4%, or 22.82 cents a gallon, in the past eight sessions. That is the longest string of gains since the summer of 2011.

Gasoline demand is weakest at this time of year and can lag peak summer demand by as much as one million barrels a day.

RBOB for May delivery, so far this month, has averaged nearly 16 cents a gallon more than the February price. That is the highest May-to-February premium in four years, and suggests investors believe gasoline stocks will still be tight as the peak demand season begins.

February heating oil settled down 0.48 cent, at $3.0616 a gallon. The February heating oil and RBOB contracts expire at Thursday's settlement.


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