NYMEX September crude oil rallied near the close Monday, settling $2.50 higher at $87.88/barrel, supported by gains in equities and losses in the US dollar.
September heating oil settled 4.04 cents higher at $2.9441/gal and September RBOB settled 5.23 cents higher at $2.8745/gal.
On ICE, September Brent settled $1.88 higher at $109.91/b.
A rally in the Dow Jones Industrial Average, which was up more than 170 points at 11,439.2 by the NYMEX settle, and the S&P 500 Index, which was up more than 20 points at 1,199.43, supported gains across the oil complex, said analysts.
Losses in the US Dollar Index, which was down more than 70 points at 73.835, also lent support to oil prices.
Mike Guido, associate director of hedge fund sales at Macquarie, said the oil complex remains "highly dependent" on non-oil drivers at the moment.
"I still see some upside from here, from a pure technical [point of view], however, if the equity market pulls back, all bets are off," he said.
While equity strength and US dollar weakness continued to drive NYMEX crude and ICE Brent futures higher, Guido noted that ICE gasoil futures were a main driver in Europe where strong demand has been seen from Germany and throughout Asia.
ICE September gasoil settled at $922.75/mt, up $5.75.
The September/October gasoil spread remained backwardated at $3.25/mt Monday from $3.75/mt on Friday, while the October/November spread was seen at $2.75/mt. The curve remains backwardated until the June 2012/July 20102 spread flips into contango.
About a week ago, the backwardation in the front-month/second-month spread was closer to 25 cents/mt.
The ICE gasoil crack, basis Brent, settled at $14.33/mt Monday, down slightly from $14.89/mt on Friday. The crack has been volatile but has ranged between $12/mt and $14/mt since mid-July.
In the spot market, the steepening backwardation in gasoil has prompted traders to consider moving material out of storage as refiners focus on desulfurization, which has tightened gasoil supplies.
Meanwhile, analyst Gene McGillian of Tradition Energy said the oil complex shrugged off data that showed that manufacturing activity in the New York region fell for the third straight month in August.
The Empire State index fell to negative 7.7 in August from negative 3.8 in July, according to the New York Federal Reserve on Monday.
Equities briefly pared earlier gains after the morning release of the Empire data but later rallied following news that Google agreed to acquire Motorola Mobility for about $12.5 billion in cash, said analysts.
"Some of the fear from last week seems to have evaporated," McGillian said, adding that investors attempted to take NYMEX crude below the $85/b level but when no sellers appeared, buyers moved in.
"There was still a $4 range between the high and low [on NYMEX crude] but the intraday volatility seems to have evaporated and the market has pushed back into an old trading band between $85 and $105," McGillian said.
One focus of the market will be Tuesday's eurozone debt meeting in Paris, led by Germany and France, said Kilduff Group analyst Mike Fitzpatrick.
"German officials have already warned the markets not to expect much. So, potentially, here we go again," Fitzpatrick said in a note, referring to recent levels of extraordinary volatility in the financial markets.
