Oil Arrests Weekly Loss as Gasoline Advances on Slow Refining

  • U.S. gasoline refining profit margin advances for third day
  • Crude inventories added 8.03 million barrels last week

Oil paused its sliding streak for most of the past two weeks as rising gasoline prices brought some support to a volatile market.

U.S. refining close to the slowest pace since January helped the motor fuel rebound while a strengthening dollar reduced the appeal of crude as a store of value, limiting a price recovery for West Texas Intermediate futures. The gasoline crack spread, a measure of the profit from processing a barrel of oil into the fuel, advanced to above $9 a barrel after touching $6.54 Tuesday.

"Gasoline is leading the way up," said Michael Hiley, head of OTC energy trading at New York-based LPS Partners. "Crude is stuck in a narrow range."

Oil has failed to sustain a gain above $50 a barrel earlier this month amid signs the market surplus will persist. U.S. inventories remain more than 100 million barrels above the five-year seasonal average. The Organization of Petroleum Exporting Countries continues to pump above its quota while Iran prepares to ramp up output once sanctions end. 

WTI for December delivery rose 18 cents, or 0.4 percent, to settle at $45.38 a barrel on the New York Mercantile Exchange after rising as much as 2 percent. The volume of all futures traded was 27 percent below the 100-day average.

Brent for December settlement increased 23 cents to end at $48.08 on the London-based ICE Futures Europe exchange. The European benchmark closed at a premium of $2.70 to WTI.

Stronger Dollar

The Bloomberg Dollar Spot Index increased for a sixth day after European Central Bank President Mario Draghi said the investigate fresh stimulus measures to boost the economy in December. A stronger dollar reduces oil’s investment appeal.

"Oil is moving with the dollar today," said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. "The market is oversupplied."

Gasoline futures rose 2.59 cents, or 2 percent, to settle at $1.3067 a gallon. The crack spread increased to $9.50 a barrel from a two-year low settlement of $6.669 on Oct. 19 as the fuel’s gains outpace crude’s.

The CBOE Crude Oil Volatility Index declined 3.3 percent to 40.39. It reached 39.58 on Oct. 16, a two-month low.

U.S. government data showed crude stockpiles expanded by 8.03 million barrels last week, the biggest increase since April and more than twice the gain forecast. Supplies rose for a fourth week through Oct. 16, the longest run of gains since April, the Energy Information Administration reported Wednesday.

Refinery utilization in the world’s biggest economy rose 0.4 percentage points to 86.4 percent after slipping to the lowest level since January in the week ended Oct. 9, according to the EIA.

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