Oil Rises for Fourth Week as Isaac Heads for Gulf
Prices capped the longest stretch of weekly gains this year on forecasts that Isaac will enter the Gulf next week after crossing Haiti today and reaching the southwest coast of Florida on Aug. 27. BP Plc (BP/), Royal Dutch Shell Plc (RDSA) and Apache Corp. (APA) said they were planning to evacuate some nonessential Gulf workers.
“The storm is going to be news over the weekend, and people just don’t want to go short at a time like this,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Crude for October delivery slid 12 cents to settle at $96.15 a barrel on the New York Mercantile Exchange. Prices rose 14 cents this week. Oil has rallied 24 percent since this year’s closing low of $77.69 reached on June 28.
Brent oil for October settlement fell $1.42, or 1.2 percent, to end the session at $113.59 a barrel on the London- based ICE Futures Europe exchange.
Isaac was 135 miles (217 kilometers) south-southeast of Port-au-Prince, Haiti, as of 2 p.m. East Coast time, the Miami- based National Hurricane Center said in an advisory. The storm, moving northwest at 14 miles per hour, had top sustained winds of 60 mph.
The system is forecast to strengthen into a hurricane off the west coast of Florida in about four days, the center said. A storm becomes a hurricane when winds reach 74 mph.
“It takes a lot of courage to carry a short through the weekend,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion.
BP began evacuating its Thunder Horse oil platform in the Gulf and suspended all crude and natural-gas production from the installation in anticipation of Isaac, Arturo Silva, a company spokesman, said in an e-mailed statement today. The London-based company also plans to remove nonessential workers from its Na Kika, Horn Mountain and Marlin platforms in the Gulf.
Shell said on its website that drilling operations have been suspended on some central and eastern Gulf assets.
“On the current calculated path, we expect that the U.S. Gulf will at least lose between 2 and 3 million barrels of crude production due to precautionary shutdowns, while oil imports will also be delayed,” Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix, said in a report today.
The U.S. pumped 1.27 million barrels a day of oil from the Gulf’s federal waters in May, or 39.4 million total for the month, according to the Energy Department.
The Gulf is home to 23 percent of U.S. oil production and 7 percent of natural-gas output, according to the U.S. Energy Department in Washington. About 44 percent of refining capacity is located on or near the Gulf Coast.
Prices also rose this week on speculation the Federal Reserve will provide additional stimulus measures to boost economic growth.
Minutes from the Federal Open Market Committee’s July 31- Aug. 1 meeting showed many members judged that stimulus “would likely be warranted fairly soon” unless the recovery’s pace picks up. Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at Jackson Hole, Wyoming, where he signaled a second round of bond buying in 2010.
“Expectations that the Fed is trying to stimulate economic growth” have boosted oil prices, said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Oil erased gains in afternoon trading on a report that the biggest consuming countries may tap emergency crude stockpiles.
The U.S. may lead International Energy Agency member nations in a joint release of oil from emergency reserves as early as next month, industry publication Petroleum Economist reported, citing unidentified sources.
The IEA has backed the move, reversing what had been vocal opposition, to discourage the U.S. from unilaterally tapping its Strategic Petroleum Reserve, the London-based journal said today. France and the U.K. have also endorsed the White House strategy and are willing to draw from their own oil stockpiles, the report said.
“The IEA news led the selloff in the market,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Electronic trading volume on the Nymex was 383,431 contracts as of 3:20 p.m. in New York. Volume totaled 466,874 contracts yesterday, 14 percent below the three-month average. Open interest was 1.49 million.
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