Oil logs 9% weekly rise — biggest since late 2016; refinery fire jolts gasoline futures

Published: June 21, 2019 4:33 p.m. ET

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July gasoline futures surged nearly 4% Friday

Associated Press
Flames and smoke emerge from the Philadelphia Energy Solutions Refining Complex in Philadelphia on Friday.
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Markets/commodities reporter
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RachelKoning Beals

News editor

Oil futures gained on Friday, with U.S. prices tallying a rise of nearly 9% for the week and highest settlement this month, lifted by expectations for economy-boosting central bank policy and continued Middle East tensions that could disrupt oil markets.

Gasoline led the climb among energy futures, up almost 4% for the session, amid reports that a fire at a 150-year-old refinery complex in Philadelphia startled residents with explosions. Any permanent damage to the facility, the largest on the U.S. Eastern Seaboard, was as yet unclear.

On Friday, the new front-month contract, August West Texas Intermediate crude US:CLQ19 rise 36 cents, or 0.6%, to settle at $57.43 a barrel on the New York Mercantile Exchange. Based on front-month prices, WTI finished at its highest since May 29. It rose 8.8% for the week, the biggest such percentage climb since the week ended Dec. 2, 2016, according to Dow Jones Market Data.

Read: Here’s what’s at stake for oil as the Iran-U.S. tensions escalate

Also on Nymex, July gasoline US:RBN19  shot up by about 7 cents, or 3.9% to $1.856 a gallon, reacting to the refinery news. Futures prices for the fuel marked their highest settlement since late May and logged a weekly rise of 7.1%. July heating oil US:HON19  rose 3.2 cents, or 1.7%, to $1.916 a gallon, ending 4.7% higher for the week.

The fire broke out at the Philadelphia Energy Solutions Refining Complex around 4 a.m. Eastern, spokeswoman Cherice Corley said, according to the Associated Press. Philadelphia Energy Solutions says the oil refining complex is the largest on the U.S. Eastern Seaboard, processing 335,000 barrels of crude oil daily.

This has the potential to have a big impact on gasoline, Patrick DeHaan, head of petroleum analysis at GasBuddy, told MarketWatch, with the refinery accounting for 27% of the region’s refining capacity.

However, the “devil is going to be in the details”—if there was “extensive damage that leads to months of downtime in the middle of driving season,” he said.

Meanwhile, international benchmark August Brent crude UK:BRNQ19  climbed 75 cents, or 1.2%, to $65.20 a barrel on ICE Futures Europe — the highest since May 30. Front-month Brent saw a 5.1% gain this week.

Oil prices saw hefty gains Thursday after Iran shot down a U.S. military drone, adding to fears of a deepening conflict and potential disruption to oil supplies. That news fueled an already price-bullish backdrop, created by expectations the Federal Reserve and other central banks will cut interest rates in coming months to sustain economic growth.

U.S. airstrikes against Iran were called off at the last minute Thursday night, according to the New York Times. The Times reported President Donald Trump had approved attacks against limited Iranian targets and planes were in the air before they were ordered to stand down. ABC News confirmed Trump called off the attack abruptly.

“U.S.-Iran tensions narrowly avoided a major escalation overnight,” said Robbie Fraser, senior commodity analyst at Schneider Electric, in daily comments. “The strike was ultimately called off, but the quick reversal nonetheless highlights how close the two countries are to direct confrontation.”

Read Iran’s downing of U.S. drone keeps Strait of Hormuz in spotlight: Here’s what you need to know

The U.S. has blamed Iran for attacks on ships near the Gulf of Oman recently, a charge the country denies.

The attacks come against the backdrop of heightened tensions between the U.S. and Iran following Trump’s decision to withdraw from Tehran’s nuclear deal with world powers a year ago. The White House separately said it was aware of reports of a missile strike on Saudi Arabia amid a campaign targeting the kingdom by Yemen’s Iranian-allied Houthi rebels.

Read: OPEC braces for ‘critical’ meeting at a particularly volatile time for oil

“The president seems to be bending over backwards these days not to add to geopolitical tensions that could send oil up 5%-6% in a day like this,” said Investing.com senior analyst Barani Krishnan. “With his reelection bid in, low oil and gas prices at the pump, seems to be Trump’s primary concern. That’s why he’s even suggested being open to making peace with Tehran, despite the continued noises against Iran by some in his administration.”

Oil saw little reaction from Baker Hughes US:BHGE  data Friday, which revealed that active U.S. drilling-rigs edged up by 1 to 789, following two consecutive weeks of declines.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies will hold meetings on July 1-2. The session was originally scheduled for June 25-26.

Among the other energy contracts, July natural gas US:NGN19  settled at $2.186 per million British thermal units, up 0.05% for the session, for at a weekly loss of 8.4%. It settled at $2.185 Thursday, the lowest front-month contract settlement since May 2016, after the EIA reported a larger-than-expected weekly rise in domestic supplies.

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