oil higher on supply cuts as gasoline demand rises

NEW YORK, Dec 24^th

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(Reuters) Brent oil settled at a near a one-month high on Tuesday in thin pre-holiday trade as traders covered short positions amid civil unrest in Africa that curbed global supply while demand for gasoline rose.

Conflict in South Sudan threatened the country's oil output, adding to supply concerns as Libya's production is off by more than 1 million barrels per day (bpd).

U.S. gasoline futures drove the oil complex higher, trading up 1.2 percent, after reaching a 15-week high in the previous session. Refinery snags in the United States and striking refinery workers in France thinned supply while demand remains robust.

"You are running refinery operations at pretty high levels for this time of year," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis. "This shows how increasingly sensitive the market has become to anything less than optimal."

Amid the uncertainty, traders bought back contracts to cover short positions ahead of the Christmas holiday on Wednesday, which drove U.S. and European prices up in light holiday trade.

"There's a rule of thumb; you really don't want to go home short with what's going on," said Rich Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.

The situation in South Sudan "is going to put a potential crunch on supply in the short term," he said.

New York Mercantile Exchange trading is closed on Wednesday for the Christmas holiday.

Brent oil settled up 34 cents to $111.90 a barrel after matching the Dec. 6 high of $112.06. This was the highest settlement price since Dec. 3.

U.S. oil futures settled up 31 cents at $99.22 a barrel, above the 200-day moving average of $98.89.

The spread between the two oil benchmarks <CL-LCO1=R> ended at $12.68 per barrel, three cents wider than the previous session's settlement.

U.S. gasoline futures reached a fresh 15-week high of $2.8269 per gallon breaching the 200-day moving average of $2.8177 for the first time in nearly four months. The contract settled at $2.8142.

The crack, or difference, between U.S. crude oil futures and gasoline <CL-RB1=R> widened by more than $1 from the previous session to $18.94 per barrel.

South Sudan's production has fallen by 45,000 barrels per day (bpd) to 200,000 bpd after oilfields in Unity state shut down due to fighting.

The United Nations could nearly double the size of its peacekeeping force in South Sudan as a deepening conflict has killed hundreds of people.

Traders will be scouring U.S. oil inventory data to gauge supply. U.S. crude oil stockpiles likely fell for the fourth straight week last week, while gasoline inventories rose, a Reuters poll of analysts showed.

The API will release its data at 4:30 p.m. EST (2130 GMT) on Tuesday while the U.S. Energy Information Administration will publish its data on Dec. 27 at 11:00 a.m. EST due to the closure of the federal government on Wednesday for Christmas.

 

 

 

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