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OIL FUTURES: Crude Turns Higher on U.S. GDP Data

Friday, Oct 26, 2012

-- Early losses turn to gains on hopes of economic recovery, oil-demand rise

-- Crude prices kept in check by highest October inventories in 30 years

-- Eyes on brewing East Coast storm for supply/demand impacts

  By David Bird 

NEW YORK--Crude oil futures prices turned higher early Friday, amid signs of recovery in the U.S. economy and hopes of rising oil demand.

The Commerce Department's report of a 2% rise in U.S. third-quarter gross domestic product abruptly halted a modest decline in the price of front-month crude-oil futures on the New York Mercantile Exchange, and pushing values slightly higher. Prices swung from a drop of 22 cents to a gain of about 27 cents in reaction to the news and gyrated on either side of unchanged in early trading.

Economists surveyed by Dow Jones Newswires expected the figure to show the U.S. economy rose at a 1.8% rate in the quarter. The stronger signal gives rise to hopes that oil-demand in the world's biggest petroleum user could recover from what government data show is a 2.2% year-to-date decline as of Oct. 19.

Light, sweet crude oil for December delivery was 10 cents higher, at $86.15 a barrel, but failed to mount a strong challenge to Thursday's intraday high of $86.75 a barrel. Crude had inched up 32 cents Thursday, ending five days of declines, and has moved in a broad range of $85-$93 a barrel in the past week after posting an intraday high above $100 in mid-September.

Analysts said crude oil prices remain under pressure from U.S. crude oil stocks that are the highest on 30 years of government data for this time of year.

Near-term prices will be set in large part by the path of Hurricane Sandy, which was expected to move up the East Coast as a tropic storm, impacting Florida and the Carolinas by Saturday. The so-called "Frankenstorm" could move up the coast, hitting the heavily populated northeast and New York Harbor region before Halloween on Wednesday.

The heavy storm will at least cut near-term demand for gasoline and diesel fuel, analysts said, and could have longer-term impacts on the supply side, if refineries or port facilities in the region are damaged.

"Oil prices are weaker as demand for oil should fall," said Phil Flynn, an analyst at Price Group. "Products are looking to gain ground as imports will drop and supplies of product, unlike crude, are very tight." But while stocks are tight on an outright basis, demand is also weak, data from the Energy Information Administration show.

U.S .gasoline demand fell 2.7% to a 9-year low for the Oct. 19 week of 8.493 million barrels a day, EIA data show. Output topped demand by about 500,000 barrels a day in the week, pushing inventories up by 1.4 million barrels to their highest level since Aug. 31.

At 198 million barrels, stocks are just 3% below a year ago, the slimmest gap in 3 months. Last month, stocks were 9% below the year-ago level. Stocks now cover 23.4 days of current gasoline demand, a three-month high, and above the 5-year average for the week of 22.5 days.

Nymex reformulated gasoline blendstock for November was up 0.55 cent, at $2.6819 a gallon. That follows a 2.8% rise Thursday, which capped a record 10-day decline in which prices fell by 12%, or nearly 36 cents a gallon.

November heating oil was 1.2%, or 3.79 cents higher, at $3.10 a gallon on worries that the storm may further tight supplies. Heating oil futures had fallen nearly 22 cents, or 6.7%, in nine straight days before a modest rise on Thursday, amid worries over weak demand.

--Write to David Bird at david.bird@dowjones.com

(END) Dow Jones Newswires

October 26, 2012 09:50 ET (13:50 GMT)

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