Oil up at Jan expiry on strong gasoline, cold weather

By Robert Gibbons

NEW YORK (BestGrowthStock) – Oil prices rose a second straight session on Monday, lifted by strong gasoline futures ahead of expected holiday demand and also by cold weather, which supported heating oil futures.

Volume was thin and trading was choppy. The expiring U.S. January crude contract was not able to break above $90 a barrel, having reached a 26-month high of $90.76 on December 7.

Oil investors shrugged off the stronger dollar and ongoing concerns about euro zone debt woes.

U.S. gasoline futures surged to their highest level since May on hopes that holiday driving will boost demand and because a closed spot arbitrage window to ship supply from Europe will make fewer imports available.

Traders also cited recent refinery snags and supply tightness in the New York Harbor.

The expiring U.S. January contract rose 79 cents to settle at $88.81 a barrel, having seesawed between $87.26 and $88.98.

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

U.S. crude for February delivery rose 77 cents to settle at $89.37, having traded from $87.73 to $89.57.

“Nearby crude futures were propped up by a strong gasoline trade and a moderate recovery in the equities but gravitation within the $88-89 area remained intact,” Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.

Monday’s total U.S. crude futures trading volume was at 509,184 lots with about an hour and a half left in post-settlement trading, still 24 percent below the 30-day average.

ICE Brent crude for February rose $1.07 to $92.74 a barrel, also in choppy trading.

Also helping lift crude oil prices was news of a shut pipeline in Nigeria amid more militant activity and tensions on the Korean peninsula also lurked as a supportive factor.

“The global risks for the holidays are not small. The Koreans keep on provoking each other, there is still a risk of further tightening measures from China and Europe remains full of surprise with its peripheries and their bond yields,” said Olivier Jakob of Petromatrix.

North Korea said it would not react to military drills by South Korea on Monday, despite an earlier threat to retaliate.

U.S.-based Chevron (CVX.N: ) said on Monday it had suspended production from an oil pipeline in Nigeria’s Delta state [ID:nLDE6BJ0BX], although Royal Dutch Shell (RDSa.L: ) said it had ended a one-month force majeure in Nigeria after repairing a pipeline.

Capital flows into China slowed in November from a near record high in October, central bank data showed, which could reduce the need for an imminent tightening of monetary policy. Oil and other commodities investors eye China’s efforts to cool inflation because China has been the major source of demand growth.

Limiting oil’s price rise as year-end trading approaches was investor caution fueled by the continuing concerns about euro zone debt woes. The dollar index (Read more about the global trade. ) (.DXY: ) strengthened and the euro fell (Read more about the trembling euro. ) after ratings agency Moody’s said it may cut the ratings on some Spanish banks.

A stronger dollar can pressure dollar-denominated oil prices as it raises the value of dollars paid to producers and raises oil prices in markets using other currencies.

COLD WEATHER SUPPORTS

Snow and frigid temperatures caused disruption across northern Europe for a third day, stranding travelers, snarling traffic and shutting schools, and the bad weather is likely to continue through the week.

While total U.S. heating demand was expected to be 2.1 percent below normal this week, heating oil demand was forecast to be 4.6 percent above normal, according to the U.S. National Weather Service.

Weekly oil inventory reports were expected to show crude oil and distillate stocks fell last week, though gasoline stockpiles were estimated to have risen, according to a Reuters survey of analysts on Monday.

U.S. oil inventory data from the American Petroleum Institute is due late Tuesday afternoon, with the government’s report following on Wednesday morning.

(Additional reporting by Gene Ramos in New York and Dmitry Zhdannikov in London; Editing by David Gregorio)

Oil up at Jan expiry on strong gasoline, cold weather