Oil complex settles higher on equity gains, stimulus comments

New York (Platts)--7Aug2012/431 pm EDT/2031 GMT

The petroleum complex settled higher across the board Tuesday as equities surged and expectations for further monetary stimulus were raised by comments made by the head of the Boston Federal Reserve.

NYMEX September crude settled $1.47 higher at $93.67/barrel. ICE September Brent crude settled $2.45 higher at $112.00/b, but not before rallying $3 to $112.55/b around 1:45 p.m. EDT (1745 GMT).

NYMEX September RBOB settled 6.91 cents higher at $2.9913/gal, while heating oil settled 5.71 cents higher at 2.9990/gal.

Risk-on trading pushed equities higher and in turn boosted the oil complex, according to Tom Pawlicki, director of market research at EOXlive.

"There is a basic euphoria about equities approaching new multiyear highs today," said Pawlicki, noting the Dow Jones Industrial average was nearing highs last seen in 2007, and the S&P 500 approaching highs last seen in April.

The Dow Jones Industrial average was up 86 points to 13,203 around the NYMEX settle. The S&P 500 was up 11 points to 1,405.

Production disruptions due to scheduled maintenance in the North Sea through September have also helped to boost Brent futures.

The North Sea Brent crude loading program released Tuesday showed loadings are set to average 100,000 b/d in September, equal to April's record low and down 16,129 b/d from August.

Loadings of North Sea Ekofisk crude in September, meanwhile, are due to rise 19,355 b/d from August to 270,968 b/d.

And hopes that markets would receive a shot in the arm were raised as Boston Fed President Eric Rosengren called for the US Federal Reserve to begin a bond-buying program and continue it until the economy and employment numbers begin to improve.

The current economic situation in the US "calls for a more substantive action than we've taken to date," Rosengren said, according to the Wall Street Journal. "We need a pro-growth monetary policy." Treading water, he added, was "not sufficient."

Meanwhile, the geopolitical risk premium has spiked as the situation in Syria continues to escalate. The ongoing conflict was seen as providing support for prices, with the Syrian army reported to be shelling rebel areas in the key battleground city Aleppo.

US Air Force weather reconnaissance flights found Tuesday that Ernesto is now a hurricane over the Caribbean, and is heading toward the Yucatan Peninsula in Mexico, according to the US National Hurricane Center.

Ernesto at the very least should slow imports of oil into the Gulf of Mexico or shut down Mexico's offshore production, according to Phil Flynn, senior analyst at Price Futures Group. But the storm will not enter the US Gulf of Mexico.

--James Bambino, james_bambino@platts.com 
--Alison Ciaccio, alison_ciaccio@platts.com 
--Edited by Kevin Saville, kevin_saville@platts.com

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