Oil Futures Rise as Traders Bet on Higher Demand

U.S. oil prices climb to two-week high

18/01/2014 23:54 AST

U.S. oil futures rose to a two-week high Friday on expectations of increasing demand for crude and petroleum products, while many traders were reluctant to bet on price declines going into the long weekend.

Light, sweet crude for February delivery rose 41 cents, or 0.4%, to $94.37 a barrel on the New York Mercantile Exchange and posted its highest settlement since Jan. 2.

Brent crude for March delivery on the ICE futures exchange, considered to be a gauge of world oil prices, gained 73 cents, or 0.7%, to $106.48 a barrel.

"Most people don't want to go home short," said Tom Reilly an options trader at SCS Commodities in New York. The markets are closed Monday for the Martin Luther King Jr. holiday.

Investors avoided such wagers mainly because over the past seven weeks, U.S. crude inventories have fallen 11%, or 41.2 million barrels reaching their lowest level since March 2012. While some of the losses were due to year-end accounting measures, and lower imports, many market participants have focused on the possibility of more oil reaching the Gulf Coast in the near future.

Next week, TransCanada Corp. (TRP, TRP.T) is expected to open the southern leg of its controversial 700,000 barrel-a-day Keystone XL pipeline. The project is expected to help relieve a bottleneck of crude supplies in Cushing, Okla., the delivery point for the Nymex futures contract, and transport more fuel to refineries in Texas.

Jim Ritterbusch, president of energy-trading advisory firm Ritterbusch & Associates, said "we look for Cushing to become a larger item of conversation next week."

The development could help narrow Brent's premium to the U.S. contract, known as West Texas Intermediate, or WTI. Earlier in the session, the so-called spread between the two benchmarks shrank to less than $12 a barrel for the first time since Jan. 2.

Meanwhile, February heating oil, which is primarily New York Harbor ultralow-sulfur diesel, climbed 3.92 cents, or 1.3%, to $3.0237 a gallon, reaching its highest settlement value since Dec. 31.

The gains came as many investors expect increased use of the heating fuel in the near future, with weather forecasts calling for frigid temperatures in the Midwest and Eastern U.S. in late January.

Front-month February reformulated gasoline blendstock, or RBOB, rose 2.53 cents, or 1%, to $2.6204 a gallon.

WSJ