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LONDON: Brent crude oil steadied around $110 a barrel yesterday as Hurricane Sandy, which forecasters said could be the largest storm ever to hit the North American mainland, approached the US East coast.
Fifty million people from the Mid-Atlantic to Canada were in the path of the storm and several large oil refineries began to shut down in anticipation of floods and power outages across the region.
Oil analysts said Sandy was likely to depress US oil consumption as commuting and road transportation fell and flights to and from East Coast airports were cancelled. US crude oil demand would fall as refineries close but US oil products demand rise in anticipation of shortages.
Brent futures for December were up 50 cents at $110.05 by 1305 GMT after earlier hitting an intra-day low of $108.51, down $1.04. Brent posted a 0.5 percent loss last week. US crude was down 30 cents at $85.98, while US petrol and heating oil futures were both up sharply.
“Hurricane Sandy is about to close schools, public transport systems, businesses and markets, including the NYSE and floor trading on NYMEX, definitely for today and possibly tomorrow,” said oil analyst Tamas Varga at brokerage PVM Oil Associates in London.
“When life stands still, the effect should be bearish for oil prices as consumers consume less oil when they are forced to stay indoors,” Varga said. Oil came under pressure from falling stock markets as investors focused on weak corporate earnings.
The FTSE Eurofirst 300 index of top European shares followed Asian markets lower, dropping 0.5 percent in early trade. The euro fell 0.3 percent to $1.2890, the lower end of its recent range between $1.28 and $1.31, waiting for bailout prospects for Spain and Greece to become clear.
Hurricane Sandy was expected to slam into the East Coast today. The CME suspended floor trading on Monday at its NYMEX world headquarters ahead of the storm, although electronic dealing will operate normally.
Phillips 66 started shutting its 238,000 barrel per day (bpd) refinery in New Jersey, while three others cut rates. The rate cuts come after a rise of nearly 6 million barrels in US crude stocks in the week to October 19.
US heating oil and RBOB gasoline futures and their crack spreads rose as speculators expected fuel supply to tighten and bet on wider price spreads between products and crude.
“Markets will be watching for reports of damage to energy infrastructure, notably refineries, post-Sandy given the state of extremely low gasoil inventories as we move into winter season,” Deutsche Bank analysts said.