Oil and Gas Prices Climb on Positive Housing and Retail Numbers

Looking for glimmers of hope in the economy has been like looking for a needle in the haystack over the past year.  There are some signs of improvement, and investors are paying close attention. Both retail purchases and U.S. home sales beat estimates last month, propelling oil and gas prices higher. Confidence in an improving and growing economy bolsters investments in oil and gas, as a stronger economy indicates an increased demand for fuel.

Analysts recognize the importance of housing and retail numbers. Chief economist at Washington’s Deutsche Bank, Adam Sieminski, noted oil “is being moved around by macro issues more than by supply and demand.” The National Association of Realtors reported a 10 percent spike in pending U.S. existing home sales in October, welcome good news in the collapsed housing market. October figures for retail sales were up 5.3 percent according to data gathered by Retail Metrics Incorporated. Retail numbers are crucial for the economy heading into the holiday shopping season.

Crude oil prices went up two days in a row for the first time in three weeks, hitting $88 a barrel. The New York Mercantile Exchange saw a 1.4 percent, or $1.25 increase for January delivery. After European Central Bank announced it would continue offering cash to banks through the first quarter, the euro gained against the dollar, a move that also pushed oil prices higher.

Refineries and transportation in the oil industry experienced some glitches earlier this week. A leak forced Chevron Corporation to close down a pipeline located near a stream in Salt Lake City. A fluid catalytic cracker needed to be restarted after it tripped offline at Valero Energy Corporation’s Benicia, California refinery. Exxon Mobil also had to deal with an isolated failure at its Baton Rouge, Louisiana refinery. A company spokesman said operations are restoring the fuel gas-treating unit, and customers will have normal rates and services provided to them.

Even with the maintenance difficulties, oil and gas prices are climbing. Heating oil, which is traded as a proxy for diesel, reached $2.4546 a gallon. The two percent increase put heating oil at its highest price since October 8, 2008. Inventories for distillates are at the second-highest level in the past 10 years. The 158.1 million barrel stockpile holds that level despite a 10 consecutive-week drop, including a 194,000-barrel loss last week.

Inventories of gasoline along the East Coast fell 1.8 percent last week according to a U.S Energy Department report. Declining stockpiles sent gasoline for January delivery up 2.4 percent, or 5.49 cents, to $2.3553 a gallon. That was the highest gasoline settlement price on the Nymex since May 3 of this year.

The exception to the fuel price increase was ethanol, which fell in cash markets in New York, Chicago and both Coasts. Futures have declined 13 percent in the last month, and denatured ethanol for December delivery fell three out of the past four days to finish at $2.075 a gallon, a 2.3 percent decrease in value.