Hasan Jamali
Oil jumped more than 3 per cent on Tuesday, snapping a four-day losing streak on efforts to strengthen the euro zone rescue fund and concerns about U.S. fuel supplies.
European officials were seen considering plans to boost the size of the region's bailout fund and to recapitalize banks, sparking hopes of an easing in the debt crisis that has dragged stock markets and commodities this month.
Equities rose and commodities gained, with gold also shaking off four days of declines. End-of-quarter and technical buying also provided lift.
"What we might be seeing is some end-of-the-quarter book marking," Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.
"Right now, the (U.S. crude futures) market may have triggered some technical buying at the $80 (U.S.) level, I think this is a technically oriented rally with some end-of-the-quarter buying supporting it."
A strong, counter-seasonal jump in RBOB gasoline futures further fueled the rally, rising nearly 5 per cent on supply concerns after news ConocoPhillips would sell or idle its Trainer, Pennsylvania plant and that Motiva Enterprise shut a cat cracker at its Louisiana refinery.
Brent futures rose $3.20 to settle at $107.14 a barrel, after touching a session high at $107.54. It marked the biggest percentage gain for Brent since Aug. 10.
U.S. crude showed even bigger gains, rising $4.21 to settle at $84.45 a barrel in the biggest daily percentage gain since May 9.
Brent volumes, which have traditionally been lower those for U.S. futures, again outpaced those of the U.S. contract.
The rising activity in Brent, compared with the New York Mercantile Exchange's U.S. contract, could be tied to traders anticipating large, long-only index commodity funds will increase their 2012 holdings in Brent relative to U.S. futures, analysts said.
The U.S. contract has come under pressure this year as rising volumes of crude from Canada flood into the U.S. Midcontinent, especially the Cushing, Oklahoma delivery point for the NYMEX contract.
"The NYMEX is just such a false indicator of where demand is and where the real price of oil is, the Brent market is well over $100 and the NYMEX is just completely detached," said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.
"I would expect to see an increase in Brent and a decrease in NYMEX (by long-only index funds)."
In afternoon activity in New York, nearly 600,000 Brent contracts had changed hands, nearly 16 per cent over the 30 day average. Only 470,000 contracts traded on the New York Mercantile Exchange's U.S. contract, about 28 per cent below its 30-day average.
EYES ON LIBYA, US INVENTORIES
The premium paid for Brent over U.S. crude narrowed to below $23 a barrel as traders focused on the return of crude supply from Libya. The country's port authority chief told Reuters the OPEC nation had shipped its first crude cargo from the eastern port of Marsa el Hariga on Sept. 25, bound for Italy.
The loss of Libyan crude, a key feedstock for Italian refiners, helped widen Brent's premium to U.S. crude to record levels over $27 a barrel this month.
Ahead of weekly inventory data from the American Petroleum Institute later Tuesday, analysts polled by Reuters forecast an 800,000 barrel build in crude oil inventories as well as increases in refined product stockpiles.
Stocks data from the U.S. Energy Information Administration, which last week showed U.S. crude oil inventories fell to the lowest level since January, are due out on Wednesday.