Crude futures up in anticipation of post-Sandy boom
John M. Biers, Dow Jones Newswires
NEW YORK -- Crude oil futures rose Tuesday on renewed tensions in the Middle East and on expectations for stronger economic growth due to rebuilding from Hurricane Sandy. But the gains were capped by the looming U.S. presidential election.
Nymex crude futures for front-month delivery in December were up 62 cents, or 0.7%, to $86.27 per barrel. Brent oil futures were up $1.17, or 1.1%, to $108.90.
Market participants have said they don't expect significant moves in markets until after Tuesday's U.S. presidential election.
Tuesday's rise in oil followed a rally Monday afternoon--especially in Brent--on headlines that two Saudi Arabian guards had been killed during a conflict with suspected al Qaeda militants on the Yemen-Saudi border, said JBC Energy in a research note. Crude was also supported Monday by news of tension between the U.N.'s atomic energy watchdog and Iran.
Carl Larry, president of trading-advisory firm Oil Outlooks and Opinions in New York, said crude oil was also picking up support in anticipation of stronger economic activity in the Northeast due to the recovery from Hurricane Sandy.
Some analysts have said Sandy has resulted in "demand destruction," or lost petroleum consumption due to less driving and other economic activity. But Mr. Larry said rebuilding from Sandy will add momentum to the strong jobs report seen last week.
"The demand here is going to be increased, not decreased," he said. "Reconstruction of the East Coast is going to be a major driving factor of oil prices."
Monday's rally came on the heels of a fairly steady retreat in oil prices the last six weeks or so that has seen the commodity fall from the $95–$100 range to the $85 range. Ray Carbone, president of Paramount Options, said the market may have oversold itself prior to the recent rally.
"$85 is a good level of support," Mr. Carbone said.
The rise Tuesday comes in spite of continued questions about the well-being of the euro zone due to the lack of a clear solution to the Greek debt problem. Also depressing prices: extra oil supply on the market from the closure of the 238,000-bpd Phillips 66 refinery in New Jersey, which is expected to be down for another two to three weeks due to damage from the hurricane.