Bloomberg News

Oil Rises to Highest Level in Almost Four Weeks as Fuels Climb

August 30, 2011

Aug. 30 (Bloomberg) -- Oil rose to the highest level in almost four weeks in New York, advancing with gasoline and heating oil as East Coast refineries worked to restart after Hurricane Irene and on signs the housing market is stabilizing.

Crude futures increased as gasoline jumped after Sunoco Inc. shut a fuel-making unit at its Philadelphia refinery and other terminals slowed rates. ConocoPhillips’s plant in Linden, New Jersey, remains shut after Irene, according to the Energy Department. The decline in home prices in June matched the previous month, according to the S&P/Case-Shiller index.

“We’re probably seeing the residual impact of Irene,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania. “The product markets are leading us higher. It’s the penultimate day for trading the September gasoline contract, which you can deliver summer-grade gasoline against.”

Crude for October delivery rose $1.63, or 1.9 percent, to $88.90 a barrel, the highest settlement since Aug. 3 on the New York Mercantile Exchange. Futures have fallen 2.7 percent this year.

Prices pared gains from the settlement after the industry- funded American Petroleum Institute reported at 4:30 p.m. in Washington that U.S. crude stockpiles increased 5.13 million barrels to 352.2 million in the week ended Aug. 26, the biggest one-week gain in oil supplies since March. October oil gained $1.39, or 1.6 percent, to $88.66 a barrel in electronic trading at 4:31 p.m.

Brent oil for October settlement gained $2.14, or 1.9 percent, to $114.02 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $25.12 to U.S. West Texas Intermediate futures, compared with a record close of $26.21 on Aug. 19.

Refinery Outages

Sunoco’s 178,000-barrel-a-day refinery in Marcus Hook, Pennsylvania, was operating at reduced rates, along with the Philadelphia plant, according to the Energy Department’s situation report from the Office of Electricity Delivery & Energy Reliability at 10 a.m. New York time. In addition to the shutdown of the 238,000-barrel-a-day Linden plant, ConocoPhillips was running the 185,000-barrel-a-day refinery in Trainer, New Jersey, at reduced rates, the report showed.

Forecasters were also watching Tropical Storm Katia, which was slowly strengthening over the eastern tropical Atlantic Ocean as of 11 a.m. Miami time, had sustained winds of 45 miles (72 kilometers) an hour. Katia is expected to become a hurricane, with winds of 74 mph or more, by Sept. 1.

Gasoline for September delivery rose 8.94 cents, or 3.1 percent, to $2.9958 a gallon on the Nymex, the highest settlement since Aug. 2. Prices have risen 55 percent in the past year. September futures expire at the close of floor trading tomorrow.

Heating oil for September delivery gained 5.9 cents, or 2 percent, to $3.0692 a gallon. Futures have risen for eight consecutive days.

Force Majeure

Prices also increased after the CME Group Inc. declared force majeure on August heating oil shipments into New York because of Hurricane Irene, extending by five days the date to make deliveries on the heating oil contract.

“The delivery facility that is scheduled to process these deliveries was impacted this past weekend by weather associated with Hurricane Irene,” CME said in a statement yesterday.

The S&P/Case-Shiller index of property values in 20 cities decreased at a slower pace in June, indicating the deterioration is lessening. The index dropped 0.1 percent from the prior month after adjustments for seasonal changes.

“We’ve had a couple of decent economic data points,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Today’s housing numbers are a little hopeful at least. I think that’s helping to support prices.”

Consumer Confidence Slips

U.S. consumer confidence tumbled to the lowest level since April 2009 and European confidence fell the most since December 2008 in reports for August today from the Conference Board and the European Commission in Brussels.

Earlier, oil prices fell as U.S. equities dropped for the first time in three days and the euro weakened against the U.S. dollar, curbing commodities’ appeal as an alternative investment.

An Energy Department report tomorrow may show U.S. crude inventories declined 500,000 barrels last week, according to the median of 13 analyst estimates in a Bloomberg News survey. Supplies fell 2.21 million barrels, or 0.6 percent, to 351.8 million in the prior week.

Oil volume in electronic trading on the Nymex was 524,873 contracts as of 3:11 p.m. in New York. Volume totaled 393,830 contracts yesterday, 42 percent below the average of the past three months and the lowest level since April 29. Open interest was 1.48 million contracts.

--With assistance from Grant Smith in London and Mark Shenk in New York. Editors: Richard Stubbe, Dan Stets

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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