WASHINGTON -- Oil prices rose by more than $1 a barrel yesterday, climbing on the back of a rally in gasoline futures, which settled at a nine-month high.
The approach of the Independence Day holiday, traditionally a busy period for US drivers, was a major factor behind the market's psychology, brokers said.
``Demand is up," said Phil Flynn of Alaron Trading Corp. ``And it's going to be a four-day holiday this year" because July 4 falls on a Tuesday.
Flynn said energy markets also responded to the Federal Reserve's apparent softening of its stance on future interest rate hikes, a signal that sent stock prices surging as well. ``The Fed decision is bullish for all the commodities," Flynn said.
Light sweet crude for August delivery rose $1.33 to settle at $73.52 a barrel on the New York Mercantile Exchange, where gasoline futures surged 8.89 cents to $2.2948 a gallon. It was the highest settlement price for front-month gasoline futures since Sept. 29, when the closing price was $2.37 shortly after Hurricane Rita damaged several refineries.
Gasoline futures have risen by more than 15 percent during the past eight trading sessions. Traders said one spark for the buying was the closure of the Calcasieu Ship Channel on the Gulf Coast, where a cleanup is under way following an oil spill at a Citgo Petroleum Corp. refinery in Lake Charles, La.
Brokers said the market is also reacting to the fact that gasoline demand continues to rise . During the past four weeks, daily gasoline demand was up 0.9 percent from a year ago at 9.4 million barrels a day, according to government statistics.
Oil prices are 23 percent higher than a year ago, driven by strong demand and a limited supply cushion.