Oil prices rally on talk of firmer market

[NEW YORK] Oil prices climbed on Tuesday on talk of a firmer market ahead of the US petroleum report, expected to show refineries continued to gear up to meet higher crude demand.

The US benchmark West Texas Intermediate contract surged nearly four percent as traders bet that the Department of Energy data will show refinery utilization rates rose for a third consecutive week last week, by 0.3 percentage point, according to a Bloomberg News survey.

The DoE's weekly report also was forecast to show that crude oil stockpiles rose by the smallest amount in six weeks, 2.25 million barrels.

"The oil market continues to reflect an enduring optimism that the reduction in non-Opec investment of the past year will be sufficient to rebalance the market and support at least some degree of upward correction in prices," said Tim Evans of Citi Futures.

US benchmark West Texas Intermediate for delivery in December jumped US$1.76 to US$47.90 a barrel on the New York Mercantile Exchange, the highest level in more than three weeks.

In London, Brent North Sea crude for December closed at US$50.54 a barrel, up a solid US$1.75 from Monday's settlement.

"The market also seems to view the prospect of a build in US crude stocks for last week as no particular obstacle to a move higher," Mr Evans said.

But Bart Melek of TD Securities said the market appeared to be going up Tuesday in "short covering and technical moves."

Prices of both WTI and Brent, the global benchmark, had fallen Monday on continued worries about abundant global supplies after news of record Russian oil production and still-contracting Chinese manufacturing output.

Joseph George of Schneider Electric pointed to bullish developments in Libya and Brazil that supported the rally.

"An indefinite cessation of crude exports from Libya's eastern port of Zeuitina have raised more concerns regarding Libyan crude oil production, which has remained about one million barrels per day under capacity through October," he said.

"The continuation of a strike by Brazil's biggest oil-sector union since Sunday has also provided lift to the crude complex today."

AFP