it should be obvious to all, as it is to the pundits, that oil has found a bottom here, and that worries about a further decline in prices are no longer a factor. ddcc again finds themselves in a favorable and improving position.
Oil Prices Extend Recent Gains
U.S. Refinery Strike Pushes Up Prices for Petroleum Products
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Oil prices gained for a fourth straight session on Tuesday as a U.S. refinery strike pushed up prices for petroleum products.
Product prices have climbed in recent days on concerns that a strike at some U.S. refineries would cut fuel production. Refineries also typically close units in February and March to perform seasonal maintenance, which can boost product prices. Retail gasoline cost $2.07 a gallon, on average, in the U.S. on Tuesday, AAA said, up about a penny from Monday.
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Higher product prices are boosting crude-oil prices on the expectation that refineries may buy more crude to take advantage of better margins. But the global crude market is still oversupplied, analysts say, and the rally may not be sustainable.
“Oil products continue to rally,” said Phil Flynn , analyst at the Price Futures Group, in a note. Though the refineries affected by the strikes say they will use nonunion labor to keep operating, “many are not certain if the refineries over the long run can maintain output,” Mr. Flynn said.
Already, Tesoro Corp. announced plans to idle one refinery in California during the strike to perform seasonal maintenance.
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U.S. crude oil for March delivery rose $1.00, or 2%, to $50.57 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose $1.35, or 2.5%, to $56.10 a barrel on ICE Futures Europe.
Refineries are seeing better profits for turning crude oil into gasoline and other products, because there is more storage space available for oil products than for crude oil, according to London consulting firm Energy Aspects.
ICE gasoil was especially strong Tuesday, trading up 4.4% at $535 a metric ton. “In an oversupplied market, discounted crude oil is…reviving the profitability of European refineries,” boosting gasoil prices, said Energy Aspects.
Gasoline futures rose 1.1% to $1.5617 a gallon, while diesel futures traded up 2.5% at $1.8005 a gallon.
Data released Friday showing a sharp drop in the number of rigs drilling for oil in the U.S. have also boosted prices. Some traders expect the cutback in drilling to lead to lower U.S. production, reducing the global glut of oil.
Gareth Lewis-Davies, an analyst at BNP Paribas , said investors were encouraged by the U.S. rigs data. But as the lag between falling rig counts and falling output is up to nine months, the price gains may not be sustained, he said. Global supply is still exceeding demand and crude-oil stocks will continue to build for some time, he said.
RBC Capital Markets on Tuesday cut its Brent crude forecast for this year to $57 a barrel from $71 a barrel and lowered its Nymex crude forecast to $53 a barrel from $65 a barrel.
