Oil fell from the highest closing price in a week in New York after Hurricane Isaac made landfall in the U.S. and industrialized nations expressed concern that elevated prices may threaten the global economic recovery.
Futures slipped as much as 0.7 percent after Isaac struck the coast of southeastern Louisiana. Refinery shutdowns because of the storm have curbed crude demand, according to Goldman Sachs Group Inc. The Group of Seven nations called on oil-producing countries to increase output and is monitoring the economic risk posed by current prices, according to a joint statement issued yesterday by the U.S. Treasury Department.
“Markets were already pricing in what was proving to be a disruptive storm,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong. “The market is focusing on the comments from governments. The comments highlight that policy makers are getting concerned about how high oil prices are.”
Oil for October delivery declined as much as 66 cents to $95.67 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.72 at 3:04 p.m. Singapore time. The contract yesterday climbed 0.9 percent to $96.33, the highest close since Aug. 22. Prices are 3.2 percent lower this year.
Brent oil for October settlement was at $112.16 a barrel, down 0.4 percent, on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was $16.44, from $16.25 yesterday.
Oil in New York may extend its decline to as low as $94.55 a barrel, along the bottom of a short-term uptrend channel on the daily chart, according to data compiled by Bloomberg. This channel started from the June 28 fall to $77.28, the 2012 intraday low. Buy orders tend to be clustered near technical-support levels.
Companies halted 93 percent of oil production in the Gulf of Mexico and 67 percent of natural-gas output as Isaac neared the Louisiana coast, the Bureau of Safety and Environmental Enforcement said. Six Louisiana refineries were shut, idling 6.7 percent of U.S. capacity, and three were running at reduced rates, data compiled by Bloomberg showed.
The storm was 70 miles (113 kilometers) south of New Orleans with top winds of 80 miles per hour, making it a Category 1 hurricane, the National Hurricane Center said in an advisory at 1 a.m. New York time. It was “moving slowly along the coast of southeast Louisiana and producing a dangerous storm surge,” the center said.
“While production and imports might continue to be impacted for a couple more days after the hurricane has passed, crude demand has also been impacted,” Stefan Wieler, an analyst at Goldman in New York, said in a note e-mailed today. “The greater concern lies in the risk to refining capacity.”
The G-7 said in its statement that it’s prepared to call upon the International Energy Agency, a 28-member group of oil-consuming countries, “to take appropriate action to ensure that the market is fully and timely supplied.” The IEA’s countries made available 60 million barrels of crude and oil products in June 2011 after Libyan output was disrupted by an armed uprising against Muammar Qaddafi.
Oil also fell after the American Petroleum Institute said U.S. crude stockpiles gained 5.5 million barrels last week. An Energy Department report today may show inventories slid 1.75 million barrels, according to a Bloomberg News survey.
Gasoline supplies decreased 2.4 million barrels, according to the API. They are forecast to decline 1.45 million barrels, according to the median estimate of 12 analyst estimates in the Bloomberg survey before the Energy Department report. Distillate stockpiles, a category that includes heating oil and diesel, rose 1.4 million barrels, compared with a projected 104,000 barrel drop in the survey.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
The Labor Day holiday on Sept. 3 marks the end of the U.S. summer driving season, the peak gasoline demand period. Refiners often idle processing units for maintenance in September and October as consumption of the motor fuel drops and before heating-oil use increases.
The rise in crude inventories is “a seasonal factor and we’ll start to see these builds,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney.
Gasoline fell as much as 0.3 percent, extending yesterday’s decline, after Venezuela extinguished a fire at its biggest refinery. State-owned Petroleos de Venezuela SA will wait at least 24 hours before resuming the 645,000 barrel-a-day Amuay refinery, Oil Minister Rafael Ramirez told reporters yesterday in Falcon state near the plant. A gas explosion on Aug. 25 and the subsequent four-day blaze shut the plant and killed 48 people.
Gasoline for September delivery was at $3.12 a gallon, down 0.61 cents, on the New York Mercantile Exchange. The contract slid 0.9 percent yesterday after rising as high as $3.205 on Aug. 27, the highest level since April 30, amid concern the Venezuelan fire and Isaac would curb supplies.