NYMEX and ICE crude futures settled higher Tuesday as a weaker dollar mixed with increased geopolitical tensions and Chinese stimulus measures to outpace European economic concerns.
NYMEX November crude settled $3.06 higher at $92.39/barrel, while ICE November Brent settled up $2.68 at $114.50/b.
The Brent-WTI spread widened to settle at $22.11/b, but not before reaching $23.11/b, the widest it has been since October 21, 2011 (See story, 1653 GMT).
November RBOB settled 6.56 cents higher at $2.9587/gal, while heating oil futures rose 5.89 cents to settle at $3.2032/gal.
"A number of commentators are pointing towards geopolitical tension, referencing Syria and Turkey; however, that situation is nothing new," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
"The recent relative weakness in oil over the past two weeks, compared to equities, appears more driven by the resilience of the US dollar," he said. "Today, the dollar is ebbing, notably against commodity currencies like the Australian Dollar, and this is allowing for an uptick in oil price back to the $90 support level."
The Australian Dollar was buying $1.0213, up 22 points around 3:00 pm EDT (1900 GMT).
Meanwhile, NYMEX products were again very strong, led by November RBOB.
"Product prices continue to remain firm as the market continues to focus on low inventory levels, be it in Europe or the US for gasoline and distillates," Tchilinguirian said.
Physical gasoline differentials in the Gulf Coast, New York Harbor and Chicago are all stronger year-on-year, and likely providing support for the paper market.
New York Harbor RBOB differentials were at a 21.50 cents/gal premium to NYMEX RBOB Monday, compared to a 8.50 cent/gal premium a year ago.
GEOPOLITICAL TENSIONS ON THE RISE
Traders and analysts were wary of the ongoing situation between Turkey and Syria and the risk it could spread to the wider region, adding focus to, "the risk that a border conflict between Turkey and Syria could put 400,000 b/d of pipeline flows originating in the northern Kurdistan region of Iraq at risk," Citi Futures Perspectives analyst Tim Evans said in a note.
Commerzbank analysts wrote earlier that rebels in Sudan have attacked the provincial capital of the main oil producing region, which could halt oil production and exports from the region.
"Earlier reports of Iran now two months away from being able to produce enough uranium for a bomb is a talking point," said Mike Guido, managing director of energy markets at Macquarie. "But overall this feels like an allocation move into oil, as it is divergent from weaker euro and equity markets, the usual anchors of the complex."
The euro was buying $1.2874 around the NYMEX settle. The S&P 500 was down 9 points at 1,446 and the Dow was down 84 points at 13,499.
Earlier, the oil complex was given a boost after China's central bank moved to drive down interest rates by selling $26 billion in seven-day notes and another $16.15 billion in 28-day notes, "to try to give the market a bit of a jolt," according to Price Futures Group energy analyst Phil Flynn.
Meanwhile, the International Monetary Fund pared its growth forecast for Greece, Spain and emerging market economies, according to Price Futures Group analyst Phil Flynn, who noted that the risks of a serious global slowdown is alarmingly high, "which is not a pleasant prospect for oil bulls."
