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Oil up above $112 on Spain, US gasoline

LONDON - Oil prices were firmer above $112 on Friday as plans for economic reform in Spain temporarily eased investor concerns about Europe’s debt crisis, whilst tight gasoline supply in the United States also helped to underpin the crude market.

Improved market sentiment helped lift oil, base metals and gold after Spain announced a crisis budget for 2013 based mostly on spending cuts. Spain has slashed ministry budgets by 8.9 percent for next year and kept public sector wages frozen for a third year.

Brent crude futures were up 69 to $112.70 a barrel by 1303 GMT, on track for a 15 percent quarterly gain. US crude was up 18 cents to $92.03.

Traders and analysts said that Brent was also drawing strength from US RBOB gasoline, which has been supported by very low inventories and unplanned outages that have tightened up the market.

Dominick Chirichella of the Energy Management Institute said RBOB had increased by almost 8 percent in the last three trading sessions as the October futures contract approaches expiry.

In the US northeast, inventory levels are at the lowest on record for this time of year, he added.

Victor Shum, managing director for downstream energy consulting at IHS Purvin & Gertz, said that supply risks in the Middle East and geopolitical worries were also lending support.

Quarterly gains

Brent futures are set to post their biggest quarterly gain in 1-1/2 years due to a combination of central bank monetary stimulus and Middle East tensions, which have tightened supply.

Brent is on track to gain around 15 percent over the quarter compared with a 20 percent drop for April to June. The US contract is set to advance 9 percent, the highest since the three months ending Dec. 31, 2011.

On the stimulus front, the US Federal Reserve initiated a third round of measures to revive growth in the world’s biggest economy. This helped to ramp risk assets, but concerns remain about weak demand in Western economies.

The market will be eyeing September’s Chicago PMI data, due later today, for clues as to how well the US manufacturing sector is doing. The PMI is expected to be unchanged at 53.

The final estimate of the Reuters/University of Michigan consumer sentiment index for September is also due, and forecast at 79 up from 74.3 in August.