Oil Rises From Lowest Level Since July After Superstorm

Oil rose from the lowest level in almost four months in New York on speculation that demand will soon rebound after Atlantic superstorm Sandy made landfall on the U.S. East Coast.

Futures gained after the storm came ashore in southern New Jersey late yesterday and drove floodwaters to life-threatening levels in a region with 60 million residents. Phillips 66 (PSX), Hess Corp. (HES), NuStar Energy LP (NS) and PBF Energy Inc. (PBF) reduced refinery operations because of Sandy.

“Most of the refineries should soon be back to normal operations, which will increase demand for crude,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It also looks like the storm will have a relatively small impact on fuel demand.”

Crude oil for December delivery rose 14 cents to settle at $85.68 a barrel on the New York Mercantile Exchange. Yesterday’s settlement of $85.54 was the lowest since July 10. Prices are down 13 percent this year.

Floor trading was suspended for a second day on the Nymex because of the storm, CME Group Inc., the exchange’s owner, said in an e-mail. Electronic trading is operating normally.

Prices were little changed after the industry-funded American Petroleum Institute reported oil inventories climbed 2.12 million barrels last week to 371.7 million. Oil was up 10 cents at $85.64 a barrel in electronic trading at 4:33 p.m. New York time.

Brent Market

Brent oil for December settlement slipped 36 cents, or 0.3 percent, to $109.08 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude’s premium to West Texas Intermediate contract narrowed to $23.40 after widening for the previous six sessions.

Six East Coast refineries curbed production because of Sandy, accounting for 1.22 million barrels of the area’s crude- processing capacity of 1.29 million barrels a day, according to data compiled by Bloomberg. The storm may cut the region’s gasoline supplies to the lowest level since at least 1990, based on Energy Department data.

“The refineries were shut in a systematic way, which should allow them to restart in an organized fashion,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “They just have to wait for the power to come back on and then we should see then back running.”

Sandy, now termed a post-tropical cyclone packing maximum sustained winds of 45 miles (72 kilometers) per hour, was centered 145 miles west of Philadelphia at 11 a.m. local time, according to the National Weather Service. The storm was moving west at 10 mph and was expected to weaken steadily over the next two days and move north into western New York state today. The cyclone will reach Canada tomorrow.

Fuel Prices

Gasoline for November delivery declined 2.8 cents, or 1 percent, to end the session at $2.7288 a gallon in New York. November heating oil dropped 2.86 cents, or 0.9 percent, to settle at $3.0866 a gallon.

New York, New Jersey, Baltimore, Long Island, Delaware Bay and Connecticut ports were closed to vessel traffic by the U.S. Coast Guard, halting tanker deliveries that help supply the region’s refineries with crude.

“We’re seeing a retracement of what’s occurred over the last couple days,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “Crude was down and the products were up yesterday and we’re seeing the opposite today on expectations that the refineries will soon be back up and the ports will soon reopen for tankers.”

Colonial Pipeline

Colonial Pipeline Co., which operates the largest system connecting the U.S. Gulf Coast and the Eastern Seaboard, shut delivery lines as terminals in Virginia, Maryland, New Jersey and New York stopped operations.

The U.S. Energy Information Administration said it will postpone the release of its weekly report on oil stockpiles and production from tomorrow because of storm-related delays. The data may be published Nov. 1, the Energy Department’s statistical unit in Washington said in an e-mailed statement.

Trading volume was 195,181 contracts as of 4:34 p.m. Volume totaled 306,145 contracts yesterday, 42 percent below the three- month average. Open interest was 1.59 million, the highest level since Sept. 19.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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