Oil rose on Thursday due to concerns about Hurricane Irene's impact on US East Coast fuel supplies and fighting in Libya. Crude supported by strong gains in gasoline and heating oil futures as the market kept a close watch on powerful Hurricane Irene, which threatened East Coast refineries.
The storm was forecast hitting the US eastern seaboard by the weekend, and the US Coast Guard was closely monitoring its track but has yet to carry out any traffic restrictions on the New York Harbor, the delivery hub for US-traded gasoline futures. "Products are leading the way as the East Coast refining centre is in the bulls-eye of Hurricane Irene," said John Kilduff, partner at Again Capital LLC in New York.
"We have not experienced a storm of this magnitude in quite some time. The refining assets should come through in fine shape, but some disruptions look likely now." Kilduff added. In London, ICE Brent crude for October delivery settled 47 cents higher at $110.62 a barrel, off its session and week's high of $111.45. On the New York Mercantile Exchange, October crude settled at $85.30, gaining 14 cents, climbing from a session low of $83.01.
US gasoline futures for September delivery settled at $2.9679 a gallon, rising 8.95 cents, or 3.11 percent. Volumes were moderate with US crude trading at 570,000 contracts, 17 percent below their 30-day average and Brent crude at 450,000 contracts, 5 percent below their 30-day average by 3:05 pm EDT. Unlike a storm in the Gulf of Mexico, an East Coast storm does not threaten significant US crude oil and natural gas production.
The East Coast is the second smallest of the five US refining regions, with just six refineries. Most of its fuel is supplied by pipeline from the Gulf Coast or tanker ship from Europe, which could be interrupted by the Irene. In Libya, rebels stormed Tripoli's Abu Salim district, one of the main holdouts of forces loyal to Muammar Qadhafi after a Nato airstrike on a building in the area, a Reuters correspondent said. Markets are concerned about the speed at which the Opec nation's oil exports can be returned to markets.
"We have not seen the end of fighting in Libya, so you see Brent crude stronger as return of Libyan oil to the market may not be as soon as earlier expected," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut. The Libyan rebel government hopes to restart oil exports within two weeks and reach full volumes in about a year, Ali Tarhouni, the official in charge of financial and oil matters told Reuters from Libya's oil ministry in Tripoli.
Hopes of a further economic stimulus when US Federal Reserve Chairman Ben Bernanke delivers a speech before central bankers on Friday had helped push oil futures higher earlier. But some analysts doubted that Bernanke, who will speak at an annual symposium in Jackson Hole, Wyoming, may actually put forth signs for a new package of quantitative easing, or QE3.
"Traders are biding their time, although there is some buying interest ahead of the speech even though there is very little in the way of a stimulus to be expected," said Matt Smith, analyst at Summit Energy in Louisville, Kentucky. US government data showed first-time jobless benefit claims rose last week but the increase was due to a strike at a major communications company, not a sign of job cuts, and oil prices quickly recovered after a brief decline.
Oil futures later fell to session lows as US equities slid, before heading higher, on very choppy trading. Wall Street opened higher after Bank of American said that billionaire Warren Buffett's investment vehicle, Berkshire Hathaway would take a $5 billion stake in the bank, pulling up banking shares.