OIL EXTENDS ADVANCE FROM 6 YEAR LOW AMID U.S. REFINERY STRIKE

[Wiljor]

Oil extended a surge from the lowest level in almost six years on speculation some investors are buying contracts to close out bearish bets. Gasoline rose as a refinery strike entered a second day.

West Texas Intermediate futures gained as much as 4.8 percent while Brent increased as much as 5 percent before paring those advances. Hedge funds and other speculators held the largest number of short contracts in WTI in four years. Oil rallied 8.3 percent on Friday as drillers pulled 94 rigs from U.S. fields last week, the most on record. Gasoline jumped to a five-week high.

“Traders are stepping in and buying the market again,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “This is a continuation of some of the short-covering that we saw on Friday. The market is watching for signs of slowing oil production.”

Oil prices fell to the lowest level since 2009 last month as the U.S. pumped the most in three decades and OPEC kept its own supplies unchanged to defend its share of the global market. The strike by oil workers at plants accounting for 10 percent of U.S. refining capacity continued Monday in the biggest walkout since 1980.

WTI for March delivery rose 89 cents, or 1.8 percent, to $49.13 a barrel at 9:30 a.m. on the New York Mercantile Exchange after reaching $50.56. The volume of all futures was more than double the 100-day average.

Brent Rally

Brent for March settlement increased $1.06, or 2 percent, to $54.05 a barrel on the London-based ICE Futures Europe exchange after rising to $55.62. The European benchmark crude traded at a premium of $4.75 to WTI.

“The market was oversold before and the sentiment was extremely negative so on a way up the shorts are being grilled, which is in itself causing prices to rise further,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail Monday.

Gasoline for March delivery advanced 2.6 percent to $1.517 a gallon on the Nymex after reaching $1.568, the highest since December.

The United Steelworkers union that represents employees at more than 200 refineries, terminals, pipelines and chemical plants stopped work Sunday at nine sites after failing to agree on a renewed labor contract. The USW hasn’t called a strike nationally since 1980, when a stoppage lasted three months.

The refineries on strike can produce about 1.82 million barrels of fuel a day, data compiled by Bloomberg show. They span the U.S., from Tesoro Corp.’s plants in Martinez, California; Carson, California; and Anacortes, Washington, to Marathon Petroleum Corp.’s Catlettsburg complex in Kentucky and three sites in Texas, according to the USW’s statement.

Rig Count

The U.S. oil rig count dropped to a three-year low of 1,223 last week, Baker Hughes said Jan. 30. Drillers idled 352 oil rigs in eight weeks.

Rising U.S. supply contributed to a global surplus that drove oil prices almost 50 percent lower last year. The Organization of Petroleum Exporting Countries, which has resisted calls to cut output, boosted production in January as Iraq pumped at a record pace, according to a Bloomberg survey of oil companies, producers and analysts.

Hedge funds and other big money managers cut their net-long positions in WTI 379 contracts to 216,325 futures and options in the week ended Jan. 27, according to the Commodity Futures Trading Commission. Short bets jumped 11 percent to 104,763, the most since 2010.

http://www.bloomberg.com/news/articles/2015-02-02/crude-oil-prices-surge-in-london-and-new-york-to-erase-declines