(For Bloomberg fair value curves, see CFVL <GO>.)
June 5 (Bloomberg) -- Brent crude advanced for the first time in five days as diesel and gasoline futures increased, improving the profit from refining oil into fuels. The European benchmark widened its premium to West Texas Intermediate.
The crack spread, the profit to process three barrels of WTI oil into two of gasoline and one of diesel, rose $1.19 to $20.61 a barrel based on July contracts, the first increase in six days. Futures also climbed after the European Central Bank cut its deposit rate below zero, bolstering American and European equity markets.
“Fuel demand is pretty robust here in the U.S., which will probably lead to increases in refining rates,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The ECB announcement is giving Brent an extra boost because it may herald a recovery there.”
Brent for July settlement rose 39 cents, or 0.4 percent, to end the session at $108.79 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 20 percent above the 100-day average at 3:31 p.m. in New York.
WTI for July delivery declined 16 cents to settle at $102.48 a barrel on the New York Mercantile Exchange. Futures touched $101.60, the lowest intraday level since May 16. Volume was 13 percent lower than the 100-day average.
The U.S. benchmark crude closed at a $6.31 premium to WTI. The $5.76 spread at yesterday’s settlement was the narrowest since April 15.
Oil rebounded as gasoline gained for the first time in five days and diesel rose for the first time in eight. Gasoline for July delivery rose 2.11 cents, or 0.7 percent, to settle at $2.9563 a gallon in New York. Ultra low sulfur diesel increased 3.16 cents, or 1.1 percent, to close at $2.8797.
Gasoline consumption totaled 9.2 million barrels a day over the four weeks ended May 30, the Energy Information Administration reported yesterday. That’s the most since August and 5.4 percent higher than a year earlier. U.S. demand peaks in the vacation season that stretches from Memorial Day in late May and Labor Day in early September.
The Standard & Poor’s 500 Index climbed to a record after ECB President Mario Draghi introduced an unprecedented round of measures to help record-low interest rates feed through to an economy threatened by deflation.
“I’m neutral to bullish about the market in the near term,” said Chip Register, managing director of Sapient Global Markets, a consultant in Boston.
WTI dipped in early trading on concern that Europe will enter deflation and as the U.S. and its allies embarked on two days of contacts with Russia in a bid to end the Ukraine crisis. Russian leaders are joining events in northern France to mark the 70th anniversary of the D-Day allied landings during World War II.
U.K. Prime Minister David Cameron will meet Vladimir Putin in Paris this evening before the Russian president has dinner with French President Francois Hollande. U.S. Secretary of State John Kerry was holding talks with Russian Foreign Minister Sergei Lavrov in Paris today.
Group of Seven leaders, meeting in Brussels last night, spared Russia more sanctions over Ukraine, while urging it to complete the pullback of its troops from the country’s border.
“There’s a risk premium built into the market,” Register said. “The Ukraine crisis will probably ease in July and August. There won’t be any big announcement but a number of small moves that will calm things.”