NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher this afternoon, rallying for the second straight session on short covering spurred by a refinery glitch and a private industry report saying there was a crude stock draw at the Cushing terminal in Oklahoma in the week-ended Aug 2.
BP's decision to shut a reformer at its 430,000-barrel-per-day (bpd) Whiting refinery in Indiana, reducing output by 20% to 25%, was a significant reason for the rally, said analyst Phil Flynn at Price Futures Group, saying the production cut prompted traders to cover short positions.
"The Genscape report saying Cushing crude stocks were drawn down 89,000 for the week-ended Aug. 2, and the U.K. decision to cut rates was were also both helpful for demand," Flynn added.
The Bank of England said today it launched a massive stimulus plan to mitigate the potential economic fallout from Britain's June 23 referendum to quit the European Union.
"I suspect short-covering of the large short positions is the most likely culprit [for the rally]," said David Thompson, executive vice president at Powerhouse, a Washington, D.C., brokerage.
NYMEX September West Texas Intermediate crude oil futures settled this afternoon $1.10 higher at $41.93 per barrel (bbl), edging off a $42.08 one-week high. On the IntercontinentalExchange, the October Brent crude contract settled up $1.19 at $44.29 bbl, off a one-week high of on the spot continuation chart of $44.34.
In products trade, the NYMEX September ULSD futures settled 3.84 cents higher at $1.3259 gallon, several ticks away from a $1.3272 one-week spot high. September RBOB futures advanced 1.81 cents to a $1.3680 gallon settlement, near a $1.3699 two-week spot high.
On Wednesday the market also rallied on short covering after the Energy Information Administration reported a bigger-than-expected 3.3 million bbl drop in gasoline stocks for the week ended July 29, and a 1.3 million bbl crude stock draw at Cushing, the delivery point for NYMEX WTI futures.
On Friday, the Labor Department is set to release its nonfarm employment report for July, with the market calling for 175,000 new jobs to have been created by the U.S. economy last month.
George Orwel can be reached at email@example.com
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