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Crude up about 2 percent as U.S. oil products jump; eyes on Iran

A petro-industrial factory is reflected in a traffic mirror in Kawasaki near Tokyo December 18, 2014. REUTERS/Thomas Peter/Files
A petro-industrial factory is reflected in a traffic mirror in Kawasaki near Tokyo December 18, 2014. REUTERS/Thomas Peter/Files

By Barani Krishnan

NEW YORK (Reuters) - Crude futures rallied around 2 percent on Tuesday, latching onto a rebound in oil products ahead of U.S. inventory data expected to show more crude draws and gasoline demand.

Also supporting prices were signs of trouble with an impending Iranian nuclear deal that could delay Tehran's hopes of lifting Western sanctions on its oil exports.

A strong dollar, which usually pressures commodity prices, did little to temper the rally. [FRX/]

Brent crude futures settled up $1.11, or 1.8 percent, at $64.45 a barrel.

U.S. crude futures settled at $61.01, up 63 cents, or 1 percent.

Industry group American Petroleum Institute (API) said after the market's close that U.S. crude stockpiles were estimated to have fallen by 3.2 million barrels last week for an eighth consecutive week of declines.

The estimate came in higher than the draw of 2.1 million forecast by analysts in a Reuters poll on Tuesday. The U.S. Energy Information Administration will release official stockpiles data on Wednesday. [EIA/S]

Futures of oil products such as gasoline and ultralow sulfur diesel (ULSD) gained more than crude, leading Tuesday's rally.

Gasoline futures settled up 2.3 percent, their most in two weeks.

ULSD also rose more than 2 percent despite the Reuters poll forecasting a rise in stocks of distillates, which include diesel.

Since the start of the peak U.S. driving season at the end of May, oil products have been remarkably strong on expectations of higher fuel demand. The Reuters poll called for a drop of 300,000 barrels in gasoline stocks.

The rally in oil products bumped up the "crack," or profit margin, refiners derive from processing crude into gasoline and diesel, after a recent slump in such margins.

"I'm guessing people who were short the ULSD and gasoline cracks the past few days took some profit to push those markets higher," said David Thompson, executive vice president of energy commodities brokerage Powerhouse in Washington. "Technical and buy-stop orders were probably activated in the process."

Research house Energy Aspects said it expected draws particularly at the Cushing, Oklahoma, delivery point for U.S. crude after output declines at U.S. shale basins such as Bakken and the Niobrara and reduced flows from Canadian-originated pipelines.

"Fundamentals north of Cushing remain strong," it said.

In Iran, the parliament passed a bill banning U.N. inspectors access to its military sites and scientists, potentially delaying Tehran from meeting a June 30 deadline on a nuclear pact crucial for resuming crude exports.

(Additional reporting by Simon Falush in London and Keith Wallis in Singapore; Editing by Lisa Von Ahn and Tom Brown)