Crude Settles at Highest Level Since Mid-September

Crude-oil futures prices settled modestly higher Wednesday as gasoline-futures prices gained for a 10th straight day and the U.S. Federal Reserve voted to keep its low-interest-rate policy in place.

Crude shook off a bigger-than-expected increase in U.S. inventories in the latest week and a surprisingly weak report from the Commerce Department that showed U.S. gross domestic product declined by 0.1% in the fourth quarter, against expectations of a 1% rise. The GDP drop was the first decline in three-and-a-half years, and it briefly plunged crude into the red.

But the raucous rally in reformulated gasoline blendstock futures continued for a 10th day as gasoline inventories in the key Mid-Atlantic region remain about 15% below their five-year average level for this time of year. The Energy Information Administration reported that implied demand for gasoline and distillate fuel--diesel and heating oil--rose last week from recently depressed levels.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled up 37 cents at $97.94 a barrel, the highest level since Sept. 14. That date, nearly 20 weeks ago, was the last time Nymex crude traded to $100 a barrel. ICE Brent crude for March settled 54 cents higher, at $114.90 a barrel, the highest price since Oct. 16.

Gene McGillian, broker and analyst at Tradition Energy, said prices may soon test $100 a barrel, but strong signs of improving oil demand will be needed to keep further gains.

"The way we shrugged off the GDP figure and the near-6-million-barrel build in crude stocks, the market clearly has that level in its sites," he said. "The global economy is slowly improving, and energy demand needs to pick up with it."

Analysts said the Fed's continuing policy of market stimulus is a positive signal for the market. "That fact is, a lot of the rally that we've had in the energy market is because of the easy money policies we've seen from the world's central bank," Mr. McGillian said.

Petroleum products prices have rallied in recent days on expectations that heavy season refinery maintenance work this quarter will tighten inventories of refined products like gasoline and heating oil.

February-delivery contracts for reformulated gasoline blendstock settled 6.53 cents, or 2.2%, higher, at $3.0387 a gallon. The contract expires at Thursday's settlement. The penny-for-penny gain was the most since Nov. 9, while the percentage increase was the biggest since Dec. 26. Wednesday's price marked the highest-ever settlement price for gasoline during January, when prices are most often the weakest of the year. In 28 years of trading gasoline futures on the Nymex, the average front-month gasoline price during January has been the lowest for the year 10 times, more than any other month.

The RBOB contract has gained 33.21 cents, or 12.3%, in the past 10 days, which is the longest stretch of consecutive gains since July 2009.

Heating oil for February delivery settled 0.81 cent higher, at $3.1173 a gallon, the most since Oct. 19. The contract has gained 2% in the last three sessions and also expires at Thursday's settlement.

Copyright (c) 2012 Dow Jones & Company, Inc.

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