Oil Surges in Early Trade Friday

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the IntercontinentalExchange surged in early trade Friday, continuing a rally that started Thursday afternoon on short covering ahead of the weekend and Monday expirations by March oil products and April Brent crude contracts.

A planned mid-March meeting between Venezuela, Saudi Arabia, Russia, and Qatar to discuss a production freeze and strong demand growth for gasoline reported for last week joined bullish short-term technical factors to rally the contracts.

At 8 a.m. CT, NYMEX April West Texas Intermediate crude futures were $1.20 or 3.6% higher, building on a weekly gain through Thursday's settlement of $3.43 or 11.6%, and have since squirted up to a $34.69 one-month high on the spot continuation chart. Initial resistance is marked at $34.78 barrel.

ICE April Brent crude futures were up $1.43 or 4.1% at $36.72 bbl after gaining $2.28 or 6.9% through Thursday afternoon, and have since rallied to a $37.00 bbl nearly two-month high on the spot continuation chart. The contract is testing retracement resistance at $37.11 bbl.

NYMEX March ULSD futures were up 3.5 cents or 3.3% at $1.1050 gallon, padding a 4.45 cents or 4.3% advance through Thursday afternoon, and have since rallied to a $1.1107 better-than one-week high. The contract has resistance at the current February high of $1.1181 gallon. April ULSD futures were up 3.64 cents at $1.1212 gallon.

NYMEX March RBOB futures were up 1.32 cents or 1.3% after surging 9.66 cents or 10.0% this week through Thursday's settlement, trading earlier at a 1-1/2 week high of $1.0774 gallon. The contract has resistance at $1.0844 gallon. April RBOB futures hold a sharp premium to the March contract, up 1.96 cents at $1.3318 gallon.

The wide spread between March and April delivery of RBOB futures reflects the transition to lower Reid vapor pressure gasoline, which is more costly to produce, and expectations for gasoline demand to increase from winter lows. That sentiment was enhanced after the Energy Information Administration on Wednesday reported implied gasoline demand spiked 372,000 barrels per day to a 9.576 million bpd six-month high.

The March-to-April RBOB futures spread widened to more than 27.0cts in early trading, the widest it has been between the first and second delivery months in 10 years.

Brian L. Milne can be reached at brian.milne@dtn.com


Brian Milne