Brent crude up 2% on Europe moves, strong diesel

Brent crude jumped more than 2% to above USD 115 a barrel on Thursday after major central banks moved to boost European bank funding and diesel and heating fuels rallied.

News that major central banks around the world will cooperate in order to prevent Europe's sovereign debt crisis from freezing up money markets was seen as a positive step toward stopping another recession.
Industrial oils like diesel and heating oil rallied about 3% on expectations demand for distillate fuel would continue to grow strongly.
JP Morgan analyst Lawrence Eagles said inventories of diesel and heating oil in the United States will probably be drawn down in the coming months by strong global demand.
"Distillate stocks will likely tighten, poised to draw by 4 million barrels over the next four months despite refineries cranking up output to all-time highs," Eagles said.
"We see the strong trend in exports that has already depleted inventories continuing."
October Brent crude , which expires on Thursday, traded up USD 2.80 to USD 115.20 a barrel at 2:35 p.m. EDT (1835 GMT), hitting a week-high and moving above its 50- and 100-day moving averages. The more heavily traded November contract gained USD 2.70 to trade at USD 112.35 a barrel.
US crude oil for October rose 49 cents to settle at USD 89.40.
US heating oil futures rose 2.8%, while RBOB gasoline futures were up 2.1%. Gas oil futures, the main distillate contract in Europe, gained 3%.
Brent's premium to US crude widened by more than USD 2 to approach USD 26. It had narrowed sharply earlier in the week as part of a sell-off in the spread.
"I think this week is set up for the classic exit strategy for somebody who had a big position in October Brent," said Richard Ilczyszyn, senior market strategist for MF Global in Chicago, adding that investors may now have shifted into long December Brent positions while going short contracts for December US oil futures. Slowing economy?
Price gains were capped by weak US economic data. The number of Americans filing new claims for jobless benefits rose unexpectedly last week in a sign that concerns about the economy were sapping an already beleaguered labor market.
Business activity in the US mid-Atlantic region also dropped for a second month in August, the Philadelphia Federal Reserve Bank said, but the rate of decline moderated from the month before.
The survey of factories in eastern Pennsylvania, southern New Jersey and Delaware is seen as one of the first monthly indicators of the health of US manufacturing.
The weak data could provide an added sense of urgency for Federal Reserve Chairman Ben Bernanke and his colleagues, who plan to take an extra day at their policy review next week to deliberate their options.
Many economists expect the central bank to unveil new measures to lift growth when the meeting concludes on Wednesday.
The central bank's program of bond purchases up to June 30, known as QE2 on Wall Street, was blamed by many market watches for driving up oil and other commodity prices by pushing cheap money into riskier assets. Middle east tensions

Oil traders said prices also received support from heightened tensions between Turkey and Israel, two of the biggest powers in the Middle East.

Turkish Prime Minister Tayyip Erdogan said on Thursday that Turkish warships could be sent to the Eastern Mediterranean at any time and Israel could not do whatever it wants there, escalating a war of words over the 2010 killing of Turkish activists.
In Libya, Benghazi-based oil firm Agoco is seeking to import up to 765,000 barrels of gasoline in the first half of October, according to traders.
While the Libyan National Transitional Council is working to restore Libya's pre-civil war crude output of 1.6 million barrels per day, analysts have said that in the short-term pent up demand for fuel imports into the country may actually tighten the Mediterranean oil market further.
Part of the money raised to pay for the fuel is likely to come from early sales of crude, which Agoco has started pumping again in small volumes after a near seven-month hiatus.
The Libyan oil company will initially give 50% of its output to trading house Vitol, until they have been repaid for fuel delivered during the months of fighting.