The oil complex settled mostly higher Thursday on a mix of geopolitical considerations and hopes that both US and European central bank officials will move forward with monetary stimulus measures.
NYMEX September crude rose $1.27 to settle at $95.60/barrel. ICE September Brent, which expired Thursday, rose 65 cents to settle at $116.90/b. October Brent rose 96 cents to settle at $115.27/b.
Products were mixed, with bullish September heating oil gaining 3.77 cents to settle at $3.1229/gal.
RBOB was the exception to the upswing, settled slightly lower, down 8 points at $3.0823/gal.
There were two factors underpinning the gains in the crude complex Thursday, said Bill O'Grady, chief market strategist at Confluence Investment Management. "We had worries about events in the Middle East, including Israeli saber-rattling, Egypt steadily remilitarizing the Sinai Peninsula, and the conflict in Syria spilling over onto its neighbors."
Secondly, O'Grady noted that there seemed to be more optimism that Europeans would make progress towards improving the Union's economic prospects and "that has brought the dollar down and the Euro up today."
The US Dollar Index was down 2.88 points to 82.357 around the NYMEX settle, while the euro was up 71 points to $1.2361.
Equities were also higher by the settle. The Dow Jones Industrial Average was 91 points higher at 13,256 and the S&P 500 was close to 10 points higher at 1,416.
In products, Thursday's gains in heating oil futures come as no surprise to O'Grady. "I keep waiting for the market to realize that rising summer inventories of distillates just hasn't happened yet this year. If refineries are running at 92% of capacity, where and how are they going to make all the distillate needed for this winter?"
O'Grady noted that the Brent/WTI spread, which settled at $21.30/b Thursday, needed to narrow before US Gulf Coast refineries began to produce distillates for domestic consumption. The US exports a large portion of distillates as they fetch a higher price on the global market, particularly in Latin America.
RBOB Thursday reached a low of $3.0525/gal, as reports that tankers loaded with European gasoline appear to be headed toward New York Harbor in an effort to support struggling Atlantic Coast gasoline supply.
"[T]raders are booking up tankers from Europe to address the tightness in East Coast gasoline," Citi analyst Tim Evans said.
UK Continent-to-US Atlantic Coast freight rates for medium-range tankers rose Thursday, according to Platts data. Sources reported multiple vessels fixed and a boost in cargo activity for that route throughout the week.
