NEW YORK (Dow Jones)--Oil prices climbed nearly $2 and closed in on $72 a barrel Tuesday as speculators returned to the market with a fresh infusion of cash.
A rally in petroleum products futures along with concerns about the coming hurricane season prompted traders to cover recently sold positions.
The National Oceanic and Atmospheric Administration said Monday that there was an 80% chance that the Atlantic hurricane season beginning June 1 would be "above normal," with eight to 10 hurricanes and four to six severe hurricanes seen on the horizon.
While other forecasters have made similar predictions all year, the hurricane outlook was enough to trigger a rally, said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale.The rally fed on itself as key technical support levels held - around $68.00 for crude oil and $2.00 a gallon for gasoline.
"You couldn't find new sellers to come into the market at these levels," Guido said by way of explaining the two-day rebound in oil prices.
The front-month July crude contract on the New York Mercantile Exchange jumped $1.80 to $71.76 a barrel after falling as low as $69.85 a barrel.
June gasoline closed 3.76 cents higher at $2.0950 a gallon. June heating oil rose 6.63 cents to $1.9989 a gallon after hitting an intraday high of $2.0250 a gallon.
Volume was relatively light, leading to exaggerated price moves.
The strength in heating oil was due to concern about the impact of new ultra-low sulfur specifications for diesel and general tightness in the physical market, traders said.
The rally in the energy complex came amid a broad-based rebound in commodities, as gold, silver and copper all soared after a sharp correction last week amid fears about rising inflation.
But unlike the rebound in metals futures, the bounce in energy futures appeared overdone, Guido said.
As impressive as Tuesday's rally in energy futures was, "I still think the market is vulnerable to a decline" Wednesday when the Energy Information Administration releases its weekly inventory data, he added.
Expectations are for the data to show builds in petroleum product stocks amid an uptick in refinery runs.
Source: Masood FArivar, Dow Jones Newswires; 201-938-2094; masood.farivar@dowjones.com.