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Gasoline, Diesel Futures Climb as Cold Snap Stings Refineries

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--Gasoline, diesel futures climb as cold weather causes refinery problems

--Analysts say bad weather could offset tightening supplies

--Fears of supply disruptions boost oil futures

(Adds API data in the last paragraph.)

 
    By Brett Philbin 
 

NEW YORK--Gasoline and diesel futures pushed higher Tuesday as frigid weather caused refinery shutdowns across the U.S., sparking concerns about refined-product supplies.

Front-month February reformulated gasoline blendstock, or RBOB, rose for the first time in a week, climbing 3.26 cents, or 1.2%, to $2.6786 a gallon. The gains came a day after gasoline futures sank to a three-week low.

February heating oil, which is primarily New York Harbor ultralow-sulfur diesel, finished up 2.05 cents, or 0.7%, at $2.9593 a gallon. The increase followed a price decline of 12.6 cents the past three days and the lowest settlement since Nov. 19.

"There was a bullish case being made for the products as you are having complications from the supply side. This [rally] isn't being driven by demand," said Matt Smith, author of energy newsletter Daily Distillation and an analyst at energy-consulting firm Schneider Electric SA (SU.FR).

Traders pushed petroleum products higher as temperatures from the Midwest to the East plunged below zero over the past 24 hours. The record arctic chill froze pipes and caused air-pressure problems for refiners who convert oil to gasoline and diesel fuel for export to other countries.

A few such issues occurred at Valero Energy Corp.'s (VLO) 195,000-barrel-a-day refinery in Memphis, which was said to have had a shutdown because of the cold weather. Exxon Mobil Corp.'S (XOM) 238,000-barrel-a-day refinery outside Joliet, Ill., also experienced equipment problems, according to filings with the National Response Center.

While market participants worried that the cold snap would tighten product inventories, analysts said the chill wouldn't have any lasting effects because fewer Americans are likely to drive in this weather and domestic gasoline and diesel-fuel inventories are still at two-month highs.

Addison Armstrong, senior director of market research at Tradition Energy, said, "it's a wash," referring to the offsetting factors.

Data from the Census Department also showed that the number of residences in the Northeast U.S. relying on heating oil fell by 22% between 2002 and 2012. Traders said because the market is small and localized, prices didn't climb further.

Meanwhile, light, sweet crude for February delivery added 24 cents, or 0.3%, to $93.67 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange climbed 62 cents, or 0.6%, to $107.35 a barrel.

Oil prices moved higher as investors worried about violence and labor unrest tightening global supplies. In Iraq, a missile strike reportedly killed 25 militants in the city of Ramadi.

Iraqi forces mounted attacks against al Qaeda-linked militants there and in Fallujah after the insurgents made their first push into a major cities of the country since the conflicts that followed the U.S.-led invasion in 2003.

The main concern is that the fighting could disrupt the country's crude exports, which were 2.4 million barrels in 2012.

In Libya, strikes continued to hurt the country's ability to restore its oil production. A blockade of Eastern ports has sharply slashed its exports in recent months.

Prices for both oil contracts climbed as traders awaited data from the Energy Information Administration on Wednesday that is likely to show a sixth straight weekly decline in U.S. crude supplies. Over the past five weeks, crude stocks have dropped by 7.9%, or 30.8 million barrels to the lowest level since Sept. 20.

The American Petroleum Institute, an industry trade group, said its own data showed that crude stockpiles fell by 7.3 million barrels in the week ended Jan. 3.

 

More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:

   Nymex Light Crude Oil Close 
   Nymex Harbor RBOB Gasoline Close 
   Nymex Heating Oil Close 
   ICE Brent Crude Oil Close 
   ICE Gas Oil Close 
 

--David Bird and Ben Lefebvre contributed to this article.

 

Write to Brett Philbin at brett.philbin@wsj.com

 

(END) Dow Jones Newswires

January 07, 2014 17:18 ET (22:18 GMT)

Copyright (c) 2014 Dow Jones & Company, Inc.

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