By Laura Mandaro and Steve Gelsi, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures on Wednesday settled above $90 a barrel for the first time since October 2008, riding a growing wave of optimism about the global recovery.
“Crude oil is the most highly correlated and best proxy for the global economy,” said Richard Ross, global technical strategist for Auerbach Grayson.
After trading sideways for much of the year, oil investors are starting to look forward to rising demand in the U.S. and emerging markets, and those hopes have been bolstered by an extended run in the stock market and gains in the Dow Jones Transportation Average (DJT 5,087, -12.30, -0.24%) , Ross said.
“When there’s velocity of commerce, that’s going to manifest itself in higher oil prices,” he added.
Crude oil for February delivery (CLG11 91.47, +0.99, +1.09%) closed up 66 cents, or 0.7%, at $90.48 a barrel on the New York Mercantile Exchange. It was the first settlement above $90 since Oct. 7, 2008, according to the exchange, and the highest settlement since oil topped $93 on Oct. 3, 2008. Read MarketWatch First Take on how the oil spike bears lumps of coal.
Factoring into the day’s trade, China allowed a rise in fuel prices. Separately, China reportedly offered to buy Portuguese sovereign debt, reducing some worries about the European debt situation. U.S. home sales rose 5.8% in November, in line with expectations, but enough to give oil a bit more support over $90.
Inventories surprise
On the flip side, rising gasoline inventories offset a deeper drop in crude-oil inventories, and analysts downplayed the drop in oil stockpiles as more pegged to year-end tax moves than demand.
Oil edged off its highs of the session after the Energy Information Administration said crude-oil inventories fell 5.3 million barrels for the week ended Dec. 17, while gasoline inventories increased 2.4 million barrels. Distillate inventories fell 600,000 barrels.
Analysts polled by Dow Jones Newswires were expecting a drop of 2.3 million barrels in crude oil, and a more modest rise in gasoline inventories, or 900,000 barrels. Distillates, which include heating oil and diesel, were expected to fall 600,000 barrels.
The deep drop in crude-oil stockpiles over the past two weeks may have more to do with limiting taxes on sitting assets than a surge in demand, said an analyst.
“We feel the EIA data has more to do with year-end inventory management for tax reasons than a tightening of the energy markets,” said Tariq Zahir, managing member at Tyche Capital Advisors.
January gasoline futures (RBF11 2.43, +0.01, +0.50%) ended up 3 cents, or 1.1%, at $2.42 a gallon. January heating oil (HOF11 2.55, +0.02, +0.74%) rose 1 cent, or 0.5%, to $2.53 a gallon.
Natural gas for January delivery (NGF11 4.10, -0.05, -1.18%) gained 9 cents, or 2.3%, to $4.15 per million British thermal units. The government reports weekly inventories data Thursday morning.
Oil had strengthened earlier in the session after a trade group’s late Tuesday report on inventories also showed a big drop in crude-oil inventories. And ahead of the U.S. session, China allowed a hike in gasoline and diesel prices.
The American Petroleum Institute late Tuesday said crude inventories fell 5.8 million barrels on the week, with gasoline supplies dropping by 2.9 million barrels.
Earlier Wednesday, rising crude prices prompted the China National Development and Reform Commission to allow refiners to increase the price of gasoline by 3.8% and the price of diesel by 4%. Read more on Chinese fuel hikes.
Also, the U.S. government boosted its third-quarter estimate of growth in gross domestic product to 2.6%, from its previous estimate of 2.5%.
Source: MarketWatch
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