Brent crude futures rose in choppy trade on Friday as Hurricane Irene targeted the US East Coast and traders weighed comments by US Federal Reserve Chairman Ben Bernanke on the economy. Bernanke gave a speech on the ailing US economy that mentioned no new stimulus measures, initially pressuring Brent and US oil. Wall Street rebounded after extending losses right after the speech.
Increasing concerns that gasoline and diesel fuel supplies will be severely disrupted by Irene also provided a boost to oil futures as refiners, terminals and pipelines began to wind down operations ahead of the storm. Brent October crude gained 74 cents to settle at $111.36 a barrel, having swung from $109.30 to $111.70. For the week, Brent gained 2.52 percent.
US October crude rose 7 cents to settle at $85.37 a barrel, having recovered from an intraday low of $82.95. It posted a 3.78 percent gain for the week, after four consecutive weekly losses. Thin crude trading volumes contributed to the volatility, with Brent and US crude's turnover well below the 30-day averages. In his speech at the Fed's annual retreat in Jackson Hole, Wyoming, Bernanke said "the recovery from the crisis has been much less robust than we had hoped".
But he did not announce any new stimulus measures even though a US government report revised second-quarter economic growth lower on Friday. A separate report showed the Thomson Reuters/University of Michigan consumer sentiment index fell to 55.7 this month from 63.7 in July, slightly better than August's preliminary reading of 54.9, the lowest level since May 1980.
"The bigger picture here is that Bernanke appears to have enough confidence that the economy is not going to worsen and so he thinks there is no need for a QE3 at this time," said Andy Lebow, broker at MF Global in New York. Lebow pointed to the stock market bouncing back after an initial move lower on the speech, "and don't forget the oil markets are still awaiting the East Coast arrival of Hurricane Irene".
At last year's Jackson Hole meeting, Bernanke hinted at what eventually became a $600 billion quantitative easing bond-buying program. Many analysts said the stimulus helped support the economy but also boosted prices of many commodities, stoking inflation.
Hurricane Irene aimed at the US East Coast refineries, a potential threat to supply, and the ongoing conflict in Opec member Libya and international pressure on Syria also underpinned oil market sentiment. A Reuters poll of analysts showed Brent prices were expected to stay above $100 a barrel next year despite increasing downward pressure from the expected return of some Libyan production and fears of a double-dip recession.
Irene weakened a little, but was still a Category 2 storm on the Saffir-Simpson scale, as tropical-storm-force winds arrived along the coast of the Carolinas, the US National Hurricane Center said on Friday afternoon. The US East Coast region has no major oil and gas production like the hurricane-prone Gulf Coast. But the region has around a dozen nuclear plants and a massive oil delivery hub at New York Harbor. Its pipelines and power networks serve more than 100 million Americans.
"PADD I (US Northeast) has plenty (of crude) to ride out any kind of supply disruptions. We are well-covered with products for this time of year and consumption will go down. This is not Katrina," Jim Beck, analyst at the US Energy Information Administration, told Reuters. Seven refineries with a total of 1,229,200 barrels per day of refining capacity are in the storm's projected path.
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