West Texas Intermediate crude gained for a third day as the U.S. economy expanded more than previously forecast in the second quarter, boosting expectations for strong oil demand.
U.S. gross domestic product grew at a 4.2 percent annualized rate last quarter, up from an initial estimate of 4 percent, the Commerce Department said. Demand for gasoline rose 3.7 percent last week, the Energy Information Administration said yesterday. BP Plc’s Whiting refinery in Indiana had a fire at a hydrotreater yesterday that may limit the plant’s ability to process high-sulfur heavy crude, according to IIR Energy.
“The downside from current price levels is quite limited,” said Paul Crovo, a Philadelphia-based oil analyst at PNC Capital Advisors. “Supply, demand conditions continue to remain relatively tight going into the second half of this year.”
WTI for October delivery rose 67 cents, or 0.7 percent, to $94.55 a barrel on the New York Mercantile Exchange, the highest settlement since Aug. 20. The volume of all futures was 8.8 percent above the 100-day average.
Brent for October settlement slid 26 cents to $102.46 a barrel on the London-based ICE Futures Europe exchange. Volume was about 15 percent below the 100-day average. Brent traded at a premium of $7.91 to WTI on ICE, compared with $8.84 yesterday.
U.S. GDP growth, propelled by the biggest gain in business investment in more than two years, was faster than the 3.9 percent increase forecast by economists surveyed by Bloomberg. Investment increased at an 8.1 percent annualized rate, the most since the first three months of 2012.
“U.S. GDP was very strong, a lot higher than anybody had expected,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Good economic numbers are pointing to higher demand.”
Total gasoline supplied, a proxy for demand, rose to 9.1 million barrels a day last week, the EIA, the Energy Department’s statistical arm, said. Gasoline use averaged 9.04 million barrels a day in the four weeks ended Aug. 22.
“The U.S. economy is getting better and that’s definitely raising demand expectations here,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The geopolitical situation seems to be giving us some support.”
A fire broke out at the Whiting refinery after an explosion yesterday, BP said in an e-mailed statement. Operations at the 405,000-barrel-a-day plant, the largest serving the Chicago area, were “minimally impacted,” the company said. The refinery receives light crude from Cushing, Oklahoma, the delivery point for WTI futures.
“If it’s operating at a reduced rate, then the refinery could switch from heavy sour crude to light sweet crude,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston. “If it’s completely down, then even running light sweet crude is not good enough to reduce the sulfur to meet the fuel quality specification.”
Crude inventories at Cushing gained 508,000 barrels last week to 20.7 million, the EIA reported yesterday.
The incident at Whiting may “put a greater call on demand for WTI crude and could strain Cushing inventories,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.
Brent gave up gains after earlier rising as tensions escalated between Russia and Ukraine. Ukrainian President Petro Poroshenko called an emergency security meeting to defend against what he called a “de facto” Russian incursion after separatists gained ground in intensified fighting.