Oil futures rallied sharply Monday as traders took cues from the rising stock market and shrugged off the relatively mild impact of Hurricane Irene.
Light, sweet crude for October delivery settled up $1.90, or 2.2%, to $87.27 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled up 52 cents, or 0.5%, at $111.88 a barrel.
Trading on the Nymex began as usual Monday, although volumes were thin, after a weaker-than-expected Hurricane Irene spent the weekend barreling through the U.S. Northeast. Crude futures largely followed Monday's equity-market rally as the Dow Jones Industrial Average closed in on break-even levels for the year, powered by rising insurance-company stocks.
"We're seeing some strength coming in on the back of equities," said Tony Rosado, crude options broker at GA Global Markets in New York. He added: "It's been very quiet."
Equities were also lifted by the Commerce Department's report that July consumer spending rose more than expected, a rare sign of resilience in the economy going into the second half of the year.
Crude prices in recent months have closely followed major U.S. stock indexes, which many oil market participants have come to see as barometers for sentiment about the broader economic outlook. The tepid recovery in the U.S., the world's biggest oil-consuming country, has prompted a selloff in crude and equities this summer, with Nymex futures coming off a high of nearly $115 a barrel, a level reached in May.
The Dow recently gained 2% to 11511 points in afternoon trading.
Oil traders will get further cues on the health of the U.S. when the Labor Department releases its monthly nonfarm payroll report, the most closely watched barometer on U.S. employment levels, on Friday.
"People are looking past the storm already and looking ahead to unemployment numbers and the rest of the numbers this week," said Phil Flynn, analyst at PFG Best in Chicago.
Although crude markets were little affected by Irene, gasoline futures sold off sharply. The decline comes on the heels of a steep rally Friday that was fueled by expectations that widespread refinery outages would lead to reduced supply.
Front-month September reformulated gasoline blendstock, or RBOB, settled down 2.82 cents, or 1%, at $2.9064 a gallon.
Only a small number of refineries wound up reporting storm-related issues. ConocoPhillips's refinery in Trainer, Pa., reduced rates over the weekend, though it returned to normal rates Monday, according to traders. The oil company's refinery in Linden, N.J., was closed altogether Saturday evening, but was said to be restarting over the next few days. ConocoPhillips declined to comment.
September heating oil settled up 0.01 cent at $3.0102 a gallon.