Oil Makes Big Gains, Settles Above $67

Crude oil continued its rally Thursday on the New York Mercantile Exchange, hurdling above $67 a barrel, spurred by a massive rally on Wall Street and renewed demand in gasoline and diesel.

The price of crude oil settled at $67.19 a barrel on the NYMEX Thursday, an increase of $1.76 over yesterday's close. Brent crude settled even higher at $69.25 a barrel on London's ICE Futures.

With the Dow Jones hitting a high for 2009, renewed interest has been sparked in the commodities markets, especially crude oil, which recently tumbled from a high of near $73 earlier this summer.

"With the move on the Dow Jones through the June high earlier this week and then setting a new 2009 high earlier today, it's created the enthusiasm in commodity traders to go out and start buying some more," said Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska. "Basically, they are thumbing their noses at the regulators who are proposing all of these new laws against speculative interests, basically saying 'We don't care. Crude oil is a key commodity, and we're going to step out and buy.'"

Lately, positive economic news has been able to sway traders into buying crude oil, despite bearish fundamentals. The hope that the economy will turn around, and in turn boost demand, has helped to buoy the price oil.

"We've rallied up into the $66-$67 range; the fundamentals really don't support it all that much," Newsom said. "By in large, the rally that we're seeing is more due to speculative interests than fundamental interests."

Demand Increase for Heating Oils Supports Crude Market

"We've got renewed demand coming in both gasoline and diesel through heating oil," Newsom said. "Both of those markets we're seeing the spreads indicate more bullish supply and demand situations."

The analyst points to an increase in agricultural demand, as well as possible storage for the winter heating season as to reasons for this sparked interest.

"It looks like we're seeing some pretty solid commercial buying coming in," Newsom explained. "You could have both the agricultural demand, you could have some early seasonal pricing for this winter coming in, but either way the contango in the heating oil market is weakening, and weakening quite a bit over the last few weeks. It's looking like some commercial traders are at least trying to take advantage of this market after it dropped. I think that sparked some buying interest."

Natural Gas Rally Putters Out

After a recent up-tick in prices that showed promise of topping $4, the price of natural gas descended today on the market. Natural gas closed at $3.550 per mmBtu on the NYMEX Thursday, a drop of nearly 25 cents.

"Natural gas has no friends; it has no reason to rally," Newsom said. "It has bearish fundamentals; the contango in the market is strong. Even investors -- they're still holding a net short position -- even with all that's going on, they don't feel an urgency to cover those net short positions right now."

Despite an exceptionally strong day on Wall Street and a rally in most other energy commodities, the price of natural gas fell.

"It's the one energy complex member that just cannot rally," he concluded. "We'll get a two-, three-day rally, maybe a week's worth of rallies, but then it's quickly erased, again, due in large part to bearish underlying fundamentals."