Oil complex settles higher, surges on signs of US debt-ceiling progress

New York (Platts)--10Oct2013/407 pm EDT/2007 GMT

The oil complex rallied Thursday on signs that the US government made progress toward ending its budget and debt-ceiling impasse, while concerns over Libyan oil supply also supported prices.

NYMEX November crude settled $1.40 higher at $103.01/barrel and ICE November Brent settled $2.74 higher at $111.80/b.

In products, NYMEX ULSD settled 5.26 cents higher at $3.0700/gal and November RBOB ended 7.51 cents higher at $2.6981/gal.

Reports Thursday said House Speaker John Boehner will ask fellow House Republicans to approve a short-term extension in the US debt ceiling in return for talks with President Barack Obama about fiscal issues.

The news also sent US equities soaring with the Dow Jones Industrial Average spiking nearly 300 points and the S&P 500 Index rallying 35 points.

"All markets turned higher as some default fears subsided," said analyst Gene McGillian of Tradition Energy.

He added that strength in product futures came from expectations that the start-up of the refinery maintenance season will lead to a drop in fuel output from refiners.

"[ULSD futures] will see support as distillate supplies remain fairly tight," McGillian said.

US distillate stocks fell to 126.04 million barrels for the week ending October 4, according to US Energy Information Administration data on Wednesday. That puts stocks 15% below the five-year average.

Tim Evans, commodity analyst with Citi Futures Perspective, said oil traders expressed fresh worry over Libyan supplies after Libyan Prime Minister Ali Zeidan was abducted for a few hours overnight, then released.

"Although he was eventually released, the incident underscores the fragile state of government control over the country and its ability to re-invigorate its oil output," Addison Armstrong, analyst at Tradition Energy, said in a note.

Evans also said there may have been some focus on the apparent drop in overall OPEC oil production for September, "although output remains above the average call on OPEC crude oil, implying some degree of market surplus," Evans said in a note.

Meanwhile, weekly US jobless claims for the week ending October 5 were 374,000, up 66,000 from the previous week's unrevised figure of 308,000.

The four-week moving average was 325,000, an increase of 20,000 from the previous week's unrevised average of 305,000, according to the Labor Department.

The jump in claims was due to a backlog in California and also the ongoing partial shutdown of the US government, analysts said.

--Alison Ciaccio, alison.ciaccio@platts.com --Edited by Jason Lindquist, jason.lindquist@platts.com