Oil edges up on demand hopes, cold weather

By Robert Gibbons

NEW YORK (BestGrowthStock) – A surge in gasoline futures to a six-month high helped oil prices rise for the third straight session on Tuesday, on a combination of rising expectations for economic growth and demand from drivers.

A soft dollar was supportive, as was cold weather which lifted heating fuels and forecasts that U.S. crude oil inventories fell last week.

Traders noted that the market was prone to volatility, given thin trading volumes and position squaring before the year end holidays.

U.S. crude for February delivery rose 40 cents to $89.77 a barrel at 12:46 p.m. EST (1746 GMT), trading between $89.06 and $89.97. Traders were watching $90 per barrel, which the market had recently tested as resistance, and support around $88 a barrel.

Crude prices reached a 26-month high of $90.76 on December 7.

The February contract took over the front-month position after the January contract expired and went off the board at $88.81 a barrel on Monday.

Total U.S. crude futures trading volume was thin, just above 212,350 lots during the noon hour in New York, well below the 678,549 30-day average.

ICE Brent crude for February rose 48 cents to $93.22 a barrel, having moved as high as $93.43.

“The oil market is currently focusing on cold weather and better-than-expected U.S. economic data for now,” said James Zhang at Standard Bank in a note.

But Zhang also said there was potential for concerns about the euro zone to drive investors away from riskier assets, such as oil.

“The euro zone debt crisis continues to spook investors periodically, with the yield of euro zone peripheral government bonds moving up again in recent days,” he said.

The euro rose against the dollar after supportive comments from China spurred a bout of short-covering, but the gains were expected to be short-lived amid fears of ratings downgrades of indebted euro zone economies. The euro pared gains when ratings agency Moody’s warned it may downgrade debt-ridden Portugal’s rating.

The dollar index (Read more about the global trade. ) (.DXY: ) was weaker, which attracted some buying with cheaper oil prices in non-U.S. terms.

REFINED FUELS USE TO RISE

Cold weather has driven up heating fuel demand in northern Europe and the United States. U.S. heating oil demand was expected to average 4.6 percent above normal.

Harsh winter weather in China, the world’s second-biggest oil consumer after the United States, has also stoked demand.

Kerosene imports for November hit an all-time high of 861,388 tonnes, up nearly 61 percent a year ago, official customs data showed on Tuesday.

Expectations that driving demand over Christmas and new year holidays would boost U.S. consumption lifted U.S. gasoline futures 2.16 cents to $2.3994 a gallon. Gasoline hit $2.4000, the highest since May 4, when futures reached $2.4315.

Gasoline supplies have been tight in the New York Harbor, delivery point for U.S. gasoline futures contract and prices have been supported by the shut gasoline-making unit at the Hovensa LLC refinery in St. Croix, U.S. Virgin Islands and the shut arbitrage window for gasoline shipments from Europe.

Ahead of weekly oil inventory reports, U.S. gasoline stockpiles were expected to have risen last week, according to a Reuters survey of analysts on Monday.

But crude oil stocks and distillates, including heating oil and diesel fuel, were forecast to be lower,

U.S. oil inventory data from the American Petroleum Institute is scheduled to be released later on Tuesday, with the government’s report following on Wednesday.

(Additional reporting by Gene Ramos in New York; Barbara Lewis and Claire Milhench in London; Seng Li Peng and Randy Fabi in Singapore; editing by Alden Bentley)

Oil edges up on demand hopes, cold weather