Oil pared a second weekly loss, rising with gasoline and heating oil on concern that Hurricane Sandy will disrupt East Coast refinery production and as the U.S. economy showed signs of growth.
Prices advanced as Sandy was forecast to intensify into a “Frankenstorm” that may become the worst to hit the U.S. Northeast in 100 years. The gross domestic product grew at a 2 percent annual rate in the third quarter, according to the Commerce Department, exceeding analysts’ expectations.
“Oil would have closed lower if not for the Frankenstorm,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “It’s obviously having a bigger effect on heating oil and gasoline because supplies are tight. If the storm shuts refineries and we’re then hit by a cold snap, we could see heating oil prices surge.”
Crude oil for December delivery gained 23 cents, or 0.3 percent, to settle at $86.28 a barrel on the New York Mercantile Exchange. Prices fell 4.8 percent this week and are down 13 percent this year.
Heating oil climbed 3.57 cents, or 1.2 percent, to end the session at $3.0978 a gallon in New York. Gasoline increased 2.27 cents, or 0.9 percent, to settle at $2.6991 a gallon.
Sandy is forecast by the National Hurricane Center to go between Philadelphia and Baltimore on Oct. 30. Five refineries in Delaware, New Jersey and Pennsylvania that produce 600,000 barrels a day of gasoline may be shut down, said Andy Lipow, president of energy consultant Lipow Oil Associates LLC in Houston.
GDP, the value of all goods and services produced, increased its growth from 1.3 percent in the prior quarter. The median forecast of economists surveyed by Bloomberg was a 1.8 percent gain.
Consumers’ purchasing power eased, with disposable income adjusted for inflation rising at a 0.8 percent annual rate from July through September, the least since the end of 2011, today’s report showed.
The GDP estimate is the first of three for the quarter, with the other releases scheduled for November and December when more information becomes available.
“The GDP number was better than expected but 2 percent growth doesn’t signal a booming economy,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “At $86 a barrel we’re close to fair value.”
The U.S. is the world’s biggest oil consumer, accounting for 21 percent of global consumption last year, according to BP Plc’s Statistical Review of World Energy.
Brent crude for December settlement increased $1.06, or 1 percent, to end the session at $109.55 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium over the Nymex futures widened for a fifth day.
Oil slumped to a three-month low on Oct. 24 after the Energy Department said supplies jumped 5.9 million barrels last week to 375.1 million, the highest level for this time of year since the government started reporting inventories in 1982.
“I don’t think there is real conviction in a rebound,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The oil inventory was very bearish.”
Production in the U.S. climbed for a seventh week to 6.61 million barrels a day in the week ended Oct. 19, a 17-year high. Gasoline consumption declined 2.7 percent to 8.49 million barrels a day, the slowest rate since March 16.
“Demand was very weak and production continues to increase,” Cooper said.
Oil may decline next week on surging U.S. inventories, weakening demand and higher production, a Bloomberg survey showed. Sixteen of 36 analysts, or 44 percent, forecast crude will decrease through Nov. 2. Fifteen respondents, or 42 percent, predicted a gain. Five forecast little change.
“Fundamentally, supply has been big,” said Bill Baruch, senior market strategist at Iitrader.com in Chicago. “There are still fears that the global economy is slowing down.”
Electronic trading volume on the Nymex was 366,304 contracts as of 3:14 p.m. Volume totaled 387,095 contracts yesterday, 26 percent below the three-month average. Open interest was 1.59 million.