Oil futures: Oil rallies as equities advance

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Oil futures rebounded Tuesday on the back of stronger equities, but the latest fighting in Libya kept a lid on the rally as rebels made strides toward securing the capital.

Light, sweet crude for October delivery settled up $1.02, or 1.2%, to $85.44 a barrel on the New York Mercantile Exchange. Brent crude recently traded up $1.41, or 1.3%, to $109.77 a barrel.

Oil's futures took off Tuesday after major U.S. stock indexes staged a broad rally. Crude's advance underscores how prices still remain sensitive to movements in equities, a market many traders have come to see as a proxy for broader U.S. economic sentiment.

"I did see a pretty decent jump in equities and we just reacted to that," said Fred Rigolini, vice president at Paramount Options.

Although an afternoon earthquake--which originated in Virginia but could be felt in cities across the East Coast--took some steam out of the rally in both stocks and oil, Nymex crude futures still finished at their highest level in almost a week.

The Dow Jones Industrial Average recently rose 2.8% to 11154.7, as investor optimism grew Tuesday that Federal Reserve Chairman Ben Bernanke could outline another round of monetary stimulus measures in a speech due Friday.

Before rallying sharply in mid-day trading, futures had spent much of the day swinging between positive and negative territory, as reports of fresh fighting in Tripoli highlighted the uncertainty of the rebels' hold over the Libyan capital.

AFP reported that rebel fighters captured Moammar Gadhafi's compound and headquarters in Tripoli following heavy fighting. But uncertainty persists over whether the rebels can forge a peaceful government and bring the country's oil production back online soon.

Libya previously exported about 1.3 million barrels of oil a day, mostly to Europe, before the outbreak of civil war in February. The removal of those exports has been a major reason behind the ascent of Brent crude, the European benchmark, above $100 a barrel this year.

"A lot of us are trying to work through...how quickly Libyan barrels can get back to the market. That's clearly a major unknown," said Andy Lebow, a vice president at brokerage MF Global in New York.

Some companies have also said oil could start flowing again soon. Eni SpA, Italy's largest oil company, has sent a technical team to assist in the resumption of operations in Libya, a spokesman for Italy's Foreign Affairs Ministry said.

"I think you'll see other companies do the same," said Tom Bentz, a director at BNP Paribas Commodity Futures, adding that "you'll see Libyan crude back on the market sooner rather than later."

Front-month September reformulated gasoline blendstock, or RBOB, settled up 4.15 cents, or 1.5%, to $2.8766 a gallon. September heating oil settled up 3.18 cents, or 1.1%, to $2.9425 a gallon.



Comments (2) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left

martin    
illinois  |  August, 23, 2011 at 05:51 PM

Now, how much will gas go up? It's time the government steps in to end this speculation (which has no foundation in fact) that has caused these gas prices to rise.

martin    
illinois  |  August, 23, 2011 at 05:51 PM

Now, how much will gas go up? It's time the government steps in to end this speculation (which has no foundation in fact) that has caused these gas prices to rise.


Caterpillar Small Wheel Loaders

Cat® Small Wheel Loaders provide superior performance and versatility to help agriculture producers improve productivity and efficiency. An extensive range ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Leads to Insight