Bloomberg News

Oil Caps Longest Rally This Year as Gasoline, Equities Rally

October 11, 2011

Oct. 11 (Bloomberg) -- Crude oil capped the longest rally this year in New York as gasoline prices surged and the Standard & Poor’s 500 Index held gains a day after making the biggest advance since August.

Futures increased for a fifth day as prices for the motor fuel climbed amid speculation that supplies will decline after Sunoco Inc. shut part of a fluid catalytic cracker at its Marcus Hook refinery in Pennsylvania. The S&P 500 gained 0.1 percent amid optimism about third-quarter earnings.

“Equities are high and that gives hope for the crude market,” said Carl Larry, director of energy derivatives and research with Blue Ocean LLC in New York. “Units going down at Marcus Hook would be bullish for both gasoline and oil because there’s going to be less demand for imported oil on the East Coast and more demand for crude in the midcontinent.”

Crude for November delivery at Cushing, Oklahoma, gained 40 cents, or 0.5 percent, to $85.81 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 21. Prices have risen 5.3 percent in the past week. The five-day advance was the longest since the period ended Dec. 23, 2010. Futures have fallen 6.1 percent this year.

Gasoline for November delivery gained 5.23 cents, or 1.9 percent, to $2.7476 a gallon on the Nymex, a three-week high.

“Oil got some bullish news with the refinery issue,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Marcus Hook gave us a little bit of a bounce.”

Marcus Hook

Sunoco is conducting work expected to take about four days on the unit at Marcus Hook, said Kevin Sunday, a spokesman for the Pennsylvania Department of Environmental Protection. Thomas Golembeski, a Sunoco spokesman, didn’t immediately respond to an e-mail seeking comment.

The S&P 500 Index rose to 1,195.54 from 1,194.89 yesterday. The Dow Jones Industrial Average slipped 0.1 percent to 11,416.30. Alcoa Inc., the biggest U.S. aluminum producer, increased 2.1 percent before reporting its quarterly results today. Mosaic Co. jumped 4.3 percent and Apple Inc. climbed 3 percent.

“Oil traders are very responsive to the condition of equities,” said Richard Ilczyszyn, a Chicago-based senior market strategist at MF Global Holdings Ltd. “Equities are a little stronger and the markets have rebounded.”

Prices also increased after the Justice Department charged two men in an alleged plot to use a weapon of mass destruction to kill Saudi Arabia’s ambassador to the U.S. The kingdom is the world’s largest oil exporter and OPEC’s biggest producer.

Alleged Plot

Manssor Arbabsiar and Gholam Shakuri were charged in a purported conspiracy to murder Adel Al-Jubeir in a scheme that began early this year and progressed through Sept. 29, according to papers filed in Manhattan federal court.

Brent oil for November settlement rose $1.78, or 1.6 percent, to settle at $110.73 on the London-based ICE Futures Europe exchange.

Earlier, oil and equities tumbled after European Central Bank President Jean-Claude Trichet said the region’s debt crisis threatens the financial system and because of uncertainty before a government vote in Slovakia on the euro area’s bailout fund.

Slovak Finance Minister Ivan Miklos told Parliament today that lawmakers should back the European Financial Stability Facility, the euro region’s enhanced bailout fund. Slovakia is the only country in the 17-nation euro area that hasn’t ratified the measure, following approval in Malta yesterday.

Slovak Vote

Slovak lawmakers rejected the bill, which is tied to a no- confidence vote against Prime Minister Iveta Radicova. Miklos said the measure would likely be approved in a subsequent vote.

“All the attention is focused on what’s going on in Europe and what’s going on with the dollar and equities and not really the oil fundamentals,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

The euro was little changed at $1.3664 at 2:36 p.m. in New York from $1.3642 yesterday. Earlier, it fell as much as 0.6 percent to $1.3566.

The Organization of Petroleum Exporting Countries reduced its demand estimate for this year for a third month today on threats to the world economy. It predicted oil demand will grow 880,000 barrels a day this year, revised down from 1.06 million barrels a day in a report last month.

The oil market is in a “very comfortable” situation and it is “too early” to talk about the next OPEC meeting, its Secretary General Abdalla El-Badri said in London today.

U.S. Supplies

An Energy Department report Oct. 13 may show U.S. crude supplies rose 800,000 barrels last week, according to the median of 15 analyst estimates in a Bloomberg News survey. The department is releasing the data a day later than usual because of yesterday’s Columbus Day holiday.

Oil volume in electronic trading on the Nymex was 632,119 contracts as of 2:36 p.m. in New York. Volume totaled 556,770 contracts yesterday, 17 percent below the average of the past three months. Open interest was 1.42 million contracts.

--With assistance from Paul Burkhardt and Mark Shenk in New York and Ayesha Daya in Dubai. Editors: Richard Stubbe, Bill Banker

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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