NYMEX November crude futures settled 24 cents higher at $92.09/barrel Tuesday after trading in a narrow range through most of the day, although movements in prompt intermonth refined product spreads suggested a less bullish outlook in heating oil and gasoline.
The crude market was focused mostly on the November expiration of the ICE Brent contract, said Tradition Energy analyst Gene McGillian.
November Brent settled 73 cents lower at $115.07/b, while the December contract fell 40 cents to settle at $114/b.
In refined products, NYMEX November heating oil settled 1.06 cents lower at $3.1985/gal Tuesday, while RBOB settled 50 points lower at $2.8453/gal. But the prompt heating oil spread -- the November/December -- narrowed to 1.36 cents/gal from 1.61 cents/gal Monday, and from 2.8 cents/gal October 4.
The same spread for RBOB has tightened to 4.32 cents/gal Tuesday from 5.10 cents/gal Monday and from 15.19 cents/gal on October 5.
The RBOB prompt backwardation had been driven to an unusually wide level for this time of year on supply concerns stemming from refinery outages, both planned and unplanned.
"Some of the fears that seemed to be more evident two weeks ago" have since faded, said McGillian, who cited the return of refineries from maintenance and the switch to cheaper winter blend gasolines.
The resent return of Delta subsidiary Monroe Energy's 185,000 b/d Trainer, Pennsylvania, refinery to the US Atlantic Coast market was considered bearish for the New York-delivered RBOB market.
McGillian also noted continued soft gasoline demand, as reported by MasterCard Tuesday.
US motorists pumped 60.398 million barrels of gasoline in the survey week ended October 12, which was 3.9% less than the corresponding week of 2011, MasterCard Advisors said (See story, 1800 GMT).
The narrowing NYMEX RBOB backwardation has coincided with weaker physical differentials, also signaling a less bullish supply picture. The physical New York RBOB barge spread against NYMEX RBOB has fallen to a 9 cents/gal premium on Monday from 28 cents/gal on October 3.
Over roughly the same period, the Los Angeles CARBOB differential has fallen to a 29.75 cents/gal premium from a $1.45/gal premium.
Backwardation has also narrowed in Europe, a supplier of gasoline to the USAC, as physical traders appeared more confident that demand would be met.
"Demand is decent, but people seem confident that refinery supply is going to come through in a bigger way over the next two weeks," a gasoline trader said, adding that the transition to winter-grade gasoline production had helped to boost prompt supply.
Still, economic data released earlier Tuesday was considered supportive for crude markets.
Germany's ZEW Center said German investor confidence grew for a second consecutive month, with a reading of minus 11.5, up from minus 18.2 in September.
US industrial production rebounded in September after a drop in August, according to the US Federal Reserve. US industrial output rose 0.4% last month after an upwardly revised 1.4% drop in August.
