Oil Soars Above $77 on Econ Optimism, Refinery Fire

Charging ahead on the New York Mercantile Exchange, crude oil futures continued to gain Tuesday as investors were spurred back into risky commodities following yesterday's better-than-expected manufacturing data.

After settling down more than 8% in January, the price of light, sweet crude oil for March delivery corrected last week's sell off with a positive move up by more than $2 to close at $74.23 a barrel.

Also edging up on the NYMEX, natural gas spot prices at the Henry Hub settled slightly higher to $5.454 per thousand cubic feet on prolonged winter weather conditions, while gasoline futures surged over the $2-threshold after today's report of a Canadian refinery fire.

According to Reuters, Valero Energy Corp's Jean Gaulin refinery was damaged by fire on Tuesday. Located near Quebec City, the Jean Gaulin refinery pumps an average 265,000 barrels per day.

"What an explosive day for the [energy] market," noted Phil Flynn, senior analyst at PFG Best in Chicago. "I think there was a combination of factors that drove up the price of oil today, but I think the mood really changed overnight -- you add in a refinery fire, some cold weather and before you know it, the market puts in an incredible performance," Flynn said.

Yesterday, the U.S. currency lost ground to the euro, and its safe-haven appeal came under additional pressure Tuesday as Wall Street's optimism was stoked by stronger earnings reports and positive economic data helping to lift both the equities and commodities markets.

"Obviously the backdrop for this movement has been the strong economic numbers we received this week," the analyst contended. "The ISM manufacturing number was very bullish for oil and really changed the tone of the market."

Flynn also pointed to increased short covering ahead of the Energy Information Administration's weekly inventory report.