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Oil Rises Gasoline Gains on Canadian Refinery Problems

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Posted by on Saturday, August 24, 2013, 10:53
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Oil prices rose on Friday led by gasoline futures following news of a unit shutdown at an East Coast Canadian refinery. While the trading volume of the Brent crude contract was higher, gains on the U.S. futures contract outpaced the international benchmark. Brent’s premium to WTI narrowed to $4.30 a barrel after a $3 per barrel spike earlier this week that sent the spread to $6 for the first time since late June.

Oil Prices

Oil Prices

Brent and U.S. crude found early support from positive U.S. manufacturing data and disruptions to Libyan exports. A short flurry in activity saw volume spike and crude prices jump 80 cents between 10:35 a.m. EDT (1435 GMT) and 10:37 a.m.

Market watchers tied the sudden move to weakness in the dollar after the U.S. Commerce Department reported a bigger-than-expected decline in U.S. new home sales to the lowest in nine months. CME Group said there was nothing unusual or irregular about the trades.

Gasoline prices shot up after energy intelligence provider Genscape reported the shutdown of a 70,000 barrel per day (bpd) fluid catalytic cracking unit at Irving Oil’s 300,000 bpd St. John refinery in New Brunswick, Canada.

Irving confirmed the unit had been shut for unplanned maintenance, and trade sources said it could be down for a week.

Brent crude was up $1.09 at $110.99 a barrel by 1:06 p.m. EDT, off earlier highs of $111.23 a barrel.

U.S. crude rose $1.68 to $106.71 a barrel, off a session peak of $106.94 and narrowing the contract’s discount to Brent to $4.29 a barrel.

Brent trading volumes were 8 percent below their 30-day moving average at just under 500,000 contracts, while U.S. crude was nearly 40 percent below that average at 370,000 contracts.

September U.S. gasoline futures was up 4.74 cents at $3.0122 a gallon. The premium of the September contract to the October contracts, which blew out to 14.08 cents from 12.64 cents on Thursday right after the first reports of the Irving refinery outage, traded at to 13.70 cents.

Oil markets have mostly been in a $5 range for the last eight weeks, with Brent swinging between $105 and $110 per barrel since early July and U.S. crude between $103 and $108.

Prices are apt to move from one side to another rapidly the longer the market stays in a range, said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.

Light trading volume during summer added to the volatility.

“During vacation time when you have light volume, you do get exaggerated price moves. You can push it a lot further a lot faster,” he said.

Libya’s largest crude oil export terminal, Es Sider, and the oil port of Zueitina remain closed, Deputy Oil Minister Omar Shakmak said, although some improvement was seen at other ports. The outages are the worst disruption of Libya’s oil sector since the 2011 civil war.

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