NYMEX December RBOB futures led the oil complex higher late in the session Friday, settling up 9.19 cents at $2.6992/gal on a short-covering and US equity boost, while expectations rise for a return to normalcy for US gasoline demand.
December crude oil settled 98 cents higher at $86.07/barrel and December heating oil ended the session up 5.01 cents at $3.0055/gal.
ICE December Brent settled $2.15 higher at $109.40/b.
Analysts said a short-covering rally and a move higher for US equities provided upside support for the oil complex.
"There is not much flow here from the hedge funds ... looks to be some shorts squaring up before the weekend, other than that, it's very quiet," said Mike Guido, managing director of energy markets at Macquarie.
Analyst Gene McGillian of Tradition Energy concurred, noting that "some of the selling pressure we've been seeing that drove the market lower has dried up."
Favorable US economic data that showed consumer confidence remained at a five-year high helped to boost equities, somewhat offsetting fears of the looming fiscal cliff.
The University of Michigan US consumer confidence survey rose to 84.9 in November, up from 82.6 in October. The latest reading is the highest since July 2007.
For RBOB, Phil Flynn, senior analyst at Price Futures Group, said expectations that gasoline demand could rise given the implementation of odd/even retail gasoline rationing in New York City, Long Island and New Jersey lent support to the futures market.
"The Nor'easter has passed and we are seeing some return to normalcy in the Northeast," Flynn said. "The market took that as a sign that demand will return after the demand destruction that was seen after Hurricane Sandy."
He added that some continued outages of terminals in the New York Harbor area were also keeping buyers in the RBOB market.
The US Energy Information Administration reported Wednesday that motor gasoline demand in the US fell 537,000 b/d to 8.307 million b/d for the week ending November 2, which included the impact of the hurricane.
By comparison, during the same reporting week in 2001, gasoline demand was at 8.671 million b/d.
While some short-term outages remain, analysts Gareth Lewis-Davies and Harry Tchilinguirian of BNP Paribas said in a research note Friday that with port terminals and pipeline operations mostly normalizing in the wake of Hurricane Sandy, the perceived tightness in East Coast markets that has led to higher prices will reverse, and along with it, price.
"Focusing on the Atlantic Basin, the normal pattern of seasonal sell-off for gasoline tends to take place abruptly and over a short period of time," the analysts said. "We believe that RBOB and EUROBOB are ripe for a sharp pull back. However, given a continuing degree of uncertainty over the full impact of Hurricane Sandy on the gasoline market, that correction may be delayed."
