Bloomberg News

Oil Rises This Week as Gasoline Surges, Greece Nears Debt Deal

January 29, 2012

Jan. 27 (Bloomberg) -- Oil climbed this week as gasoline jumped to the highest level since August and amid signs Greece is near an agreement with its creditors.

Futures rose 1.1 percent this week after gasoline surged on speculation that refinery outages and plant closures will cut supplies. Olli Rehn, the European Union’s commissioner for economic and monetary affairs, said an agreement is “very close” on private-sector involvement in a Greek debt swap.

“The closing of a number of refineries in the Northeast is making people very supply-conscious during a period with weak gasoline demand,” said Peter Beutel, president of trading advisory company Cameronhanover.com in New Canaan, Connecticut. “Expectations that they will put together a Greek deal soon are lifting the entire complex.”

Oil for March delivery increased $1.10 this week to settle at $99.56 a barrel on the New York Mercantile Exchange. Prices have climbed 16 percent in the past year. Futures slipped 14 cents today.

Brent oil for March settlement gained $1.60, or 1.5 percent, this week to $111.46 a barrel on the London-based ICE Futures Europe exchange. The futures ended today’s session up 67 cents, or 0.6 percent.

Gasoline futures for February delivery advanced 8.02 cents, or 2.8 percent, today to $2.9268 a gallon, the highest settlement since Aug. 31. Prices gained 5.1 percent this week.

ConocoPhillips has scheduled a shutdown of a catalytic cracker at the 238,000-barrel-a-day Bayway refinery in New Jersey, the Houston-based company said today in a state regulatory filing. In Illinois, the company’s 380,900-barrel-a- day Wood River refinery reported a wet gas compressor tripped offline yesterday.

In Texas, Royal Dutch Shell Plc reported a “temporary upset” at its 340,000-barrel-a-day refinery in Deer Park today.

Refinery Closures

Two refineries in Pennsylvania have been closed because they weren’t profitable, and Hovensa LLC said last week it will shut the 350,000-barrel-a-day St. Croix refinery in the U.S. Virgin Islands by mid-February.

“The refinery closures are sending gasoline higher, which is helping pulling crude higher as well,” Beutel said. “The prospect of a Greek deal is the primary driver, though.”

Gasoline output tumbled 2.8 percent last week to 8.54 million barrels, the least since February 2010, the Energy Department reported Jan. 25. Demand rose for the first time in four weeks, gaining 1.3 percent to 8.1 million barrels a day.

Rehn said at the World Economic Forum in Davos, Switzerland, today that a deal between the Greek government and the private-sector community may come “if not today, then over the weekend.”

The euro increased every day this week against the dollar and touched $1.3229 in intraday trading today, the highest level since Dec. 13. A stronger euro and weaker dollar boost commodities’ appeal as an alternate investment.

U.S. Economy

Oil prices slipped today as data showed the U.S. economy expanded less than forecast.

Gross domestic product climbed at a 2.8 percent annual rate in the fourth quarter, slower than the 3 percent growth forecast by economists surveyed by Bloomberg, a Commerce Department report showed.

“We’ve had wrestling between the slightly weaker-than- expected GDP number and the improving Greece outlook,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Federal Reserve policy makers said Jan. 25 that they were concerned about the economy’s lack of vigor, prompting a pledge to keep interest rates near to zero into late 2014. Oil rose for two straight days after the Fed’s announcement.

“The market is disappointed that the economy is not as strong as people had hoped,” said Phil Flynn, an analyst at PFGBest in Chicago.

Iran Tensions

Oil also increased this week on concern that tensions with Iran may disrupt supplies.

Iran has said it may close the Strait of Hormuz, the transit point for about a fifth of global crude, after the EU announced Jan. 23 that it will implement an oil embargo starting July 1 to pressure the Islamic republic over its nuclear program.

Iran’s parliament will consider a bill Jan. 29 that calls for a halt of oil exports to Europe starting next week, Hossein Ibrahimi, the vice chairman of the parliament’s National Security and Foreign Policy Commission, said today in a report by the state-run Fars news agency.

“With Iran hanging over the market, people are not going to sell oil,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York.

Crude may rise next week, according to a Bloomberg News survey. Fifteen of 32 analysts and traders, or 47 percent, forecast oil will advance through Feb. 3. Ten respondents, or 31 percent, predicted prices will drop and seven estimated there will be little change.

Oil volume in electronic trading on the Nymex was 422,789 contracts as of 4:05 p.m. in New York. Volume totaled 514,378 yesterday, 12 percent below the three-month average. Open interest was 1.37 million contracts.

--With assistance from Barbara J Powell in Dallas, Nicholas Comfort in Frankfurt. Editors: Margot Habiby, Dan Stets

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

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


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