Oil Futures Rise Ahead of Crude-Inventory Reports
--Nymex crude for January was up 1.2% at $98.54 a barrel
--Market expects another decline in U.S. crude stockpiles
--European Commission to remove import duties on jet fuel
By Christian Berthelsen
NEW YORK--U.S. oil prices rose Tuesday as traders anticipated a decline in crude stockpiles for a second week in a row.
Crude for January delivery was up $1.20, or 1.2%, to $98.54 a barrel on the New York Mercantile Exchange. Brent crude futures were flat at $109.39 a barrel. Both contracts had been higher in Asian and European trading after China reported 10% year-on-year growth in value-added industrial output.
Analysts and brokers said traders were buying--or closing out short positions--in the belief that U.S. crude-storage data to be released Tuesday afternoon and Wednesday morning would show another reduction, a positive sign for demand.
"The early indication looks like it's going to be another strong week of runs," said Carl Larry, analyst and publisher of Oil Outlooks and Opinions.
Analysts said some of the move in the U.S. contract, West Texas Intermediate, was driven by a popular trade betting on its price difference with Brent, the global benchmark. The gap, which has been volatile this year, doubled during November and has contracted by about 25% in December. The gap has narrowed as TransCanada Corp. (TRP.T) began loading oil into a new pipeline that is expected to ease a crude glut in Oklahoma and bring more oil to Texas refineries.
"We're seeing in general since the pipeline news of last week a little bit of unwinding of Brent-WTI that had a really big run," said Ray Carbone, president of brokerage Paramount Options. "It caught a market that was short WTI and long Brent in general, and we've seen that spread unwind rather viciously."
Also supporting the market was a move by the European Commission to remove import duties on jet fuel from all foreign countries including the U.S., which was expected to be a big benefit to U.S. refiners. Under an earlier version of the proposal, duties were only to be lifted for certain Middle Eastern countries and India.
"This will benefit U.S. refineries first and foremost," JBC Energy said in a note. "With the import duty removed, export economics are set to improve overnight and U.S. exports to the EU are almost certain to further increase next year."
The American Petroleum Institute is expected to release its weekly oil inventory report Tuesday at 4:30 p.m. EST, followed Wednesday by the more closely watched U.S. Energy Information Administration weekly data.
Gasoline and diesel futures both rose. January reformulated gasoline blendstock, or RBOB, was up 0.3% to $2.683 a gallon. January diesel was up 0.3% to $3.024 a gallon.
Write to Christian Berthelsen at firstname.lastname@example.org
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