NEW YORK (Reuters) – Crude oil prices jumped as much 3 percent on Monday after a rally in U.S. gasoline and diesel due to a refinery outage helped crude futures advance from multi-month lows earlier in the session.
The dollar’s .DXY drop to a near two-week low also made oil and other commodities denominated in the greenback more affordable to holders of the euro and other currencies. [USD/]
Hedge funds and other big speculators raised their bullish exposure to U.S. crude for the first time in seven weeks, trade data on Friday showed, even as most traders and investors feared weaker demand and higher supplies ahead.
In Monday’s session, gasoline futures RBc1 jumped almost 4 percent, heading for its largest daily gain in a month, after BP Plc’s 240,000 barrel per day crude distillation unit at its Whiting, Indiana, refinery, was shut by a malfunction.
Futures of ultra low sulfur diesel HOC1 rose more than 3 percent, rebounding from last week’s six-year lows.
Brent crude was up $1.50, or 3 percent, at $50.11 a barrel by 1:26 p.m. ET after hitting a six-month low of $48.24 earlier in the session.
U.S. crude CLc1 rose 80 cents, or 1.9 percent, to $44.67, up from its session low in Asian trading at $43.35, its lowest in 4-1/2 months.
Both benchmarks had fallen in the past six weeks, hampered by a supply glut.
“The strength in refined products is pulling crude prices higher today,” said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.
“A reduction in refinery activity should logically decrease the demand for crude, all things being equal. But the strong link between refined products and crude in the instance of a refinery issue creates the dynamic where the increased demand for the now, temporarily scarce gasoline outweighs the lessened demand for crude.”
Refining margins hit a one-week high for gasoline CL-RB1=R and 2-1/2 month peak for diesel CL-HO1=R.
Refined oil products usually rally during the summer in the United States, when driving activity peaks.
This year, the run-up in gasoline came as early as April but lost steam lately as some traders and investors deemed the market had gotten ahead of itself.
Despite the strength in U.S. crude’s prompt price, its discount to Brent CL-LCO1=R was back at $5-per-barrel for the first time in 10 days.
The U.S. crude complex’s structure also weakened, with nearby contracts at a wider discount to longer-dated oil. The front-month’s discount to the second-month CLc1-CLc2 was at its highest since mid-July.
