Crude oil rose to a four-week high in New York as a low-pressure system in the Gulf of Mexico that will probably develop into a storm led energy companies evacuate platforms and rigs in the Gulf of Mexico.
Futures gained 0.1 percent as BP Plc, Anadarko Petroleum Corp. (APC) and Royal Dutch Shell Plc (RDSA) began removing workers from the Gulf, home to 27 percent of U.S. oil output. A Labor Department report tomorrow may show U.S. employers added 65,000 workers last month following a 117,000 gain in July, according to a Bloomberg News survey.
“The market is pricing in a probable disruption in domestic supply,” said Jason Schenker, the president of Prestige Economics, an energy advisory company in Austin, Texas. “Prices will move higher if there are further moves to evacuate workers from the region.”
Crude oil for October delivery advanced 12 cents to $88.93 a barrel on the New York Mercantile Exchange, the highest settlement since Aug. 3. Futures dropped 7.2 percent in August and are down 2.7 percent this year.
Brent oil for October settlement dropped 56 cents, or 0.5 percent, to $114.29 a barrel on the London-based ICE Futures Europe exchange. The contract earlier reached $115.36, the highest intraday price since Aug. 3. The European benchmark was at a premium of $25.36 to U.S. futures, compared with a record $26.21 on Aug. 19, based on closing prices.
The system of thunderstorms has a 80 percent chance of organizing into a tropical storm in the next two days, the National Weather Service said in a weather outlook at 1:40 p.m. New York time. That’s up from 60 percent yesterday. The system is producing gusty winds and thunderstorms over the central and eastern Gulf, the center said.
“The system in the Gulf explains why U.S. crude is rising here while Brent and the stock market are falling,” Schenker said. “The spread should come in a bit further.”
About 5.7 percent of oil production from the Gulf is shut as an area of thunderstorms that may become Tropical Storm Lee crosses the body of water, according to the Bureau of Ocean Energy Management, Regulation and Enforcement. About 80,000 barrels of oil per day have been curtailed, the bureau said in an update to its website today.
BP is evacuating all personnel at platforms in the Gulf of Mexico, according to a message on the company’s hurricane hot line. Anadarko evacuated workers from its Gulf facilities and is shutting output at eight operating platforms.
Shell said it was evacuating employees from most of its Gulf operations and has shut in some production, mainly from subsea fields. W&T Offshore Inc. (WTI) has removed “a few” non- essential maintenance and construction workers and contractors.
Katia, the second hurricane of the Atlantic season, may grow into a major storm this weekend north and east of Puerto Rico, the U.S. National Hurricane Center said. The storm presents no threat to land anytime soon, the center said.
Tomorrow’s Labor Department report will probably show the jobless rate held at 9.1 percent last month, according to the median forecast in a Bloomberg News survey.
“If tomorrow’s report comes in better than expected it will probably lift oil above $90, which would be important technically,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “There’s a great hope the Fed will do something to boost growth.”
Oil rose earlier after reports showed U.S. manufacturing unexpectedly grew in August and jobless claims decreased, bolstering optimism about the economy. The Institute for Supply Management’s factory index fell to 50.6 in August from 50.9 in July. A reading of 50 is the dividing line between expansion and contraction. The Labor Department said jobless claims declined by 12,000 to 409,000 last week.
“The news today can be taken as either positive or negative for the market, so it’s not giving us much direction,” said Carl Larry, director of energy derivatives and research with Blue Ocean LLC in New York. “Attention is already shifting to the unemployment report tomorrow.”
Other reports showed a global manufacturing slowdown may be unfolding. A measure of Australian manufacturing slumped in August to a more than two-year low, a gauge of the industry in China hovered near its weakest point in 29 months as exports declined, and factories in Europe contracted more than initially estimated, according to surveys.
“Economists were over-optimistic earlier this year, and now they are undershooting a bit,” O’Grady said. “The number wasn’t that impressive, but it was better than expected. Some of the components are looking weak.”
Federal Reserve Chairman Ben S. Bernanke, speaking at the annual central bank symposium last week in Jackson Hole, Wyoming, said the Fed still had tools at its disposal to stimulate the economy even as he declined to specify which measures it might use.
Oil volume in electronic trading on the Nymex was 507,137 contracts as of 3:58 p.m. in New York. Volume totaled 928,207 contracts yesterday, 36 percent above the average of the past three months. Open interest was 1.52 million contracts.
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