Oil fell to the lowest level in almost four months on speculation that the shutdown of refineries on the U.S. East Coast because of Hurricane Sandy will add to already ample supplies.
Futures dropped for a third week as Phillips 66 and Hess Corp.’s New Jersey refineries remain shut four days after the storm struck. Oil inventories exceeded 370 million barrels last week, the most for this time of year in at least 30 years. Prices extended losses as U.S. stocks erased gains and the dollar strengthened against the euro.
“We are still having some fallout from Sandy and prices are influenced by what’s going on on the East Coast,” said Jacob Correll, a Louisville, Kentucky-based analyst at Summit Energy Inc., which manages more than $20 billion in companies’ annual energy spending. “Equities are lower and the dollar is strengthening, and both can definitely weigh on oil.”
Crude oil for December delivery fell $2.23, or 2.6 percent, to $84.86 a barrel on the New York Mercantile Exchange, the lowest settlement since July 10. Prices fell 1.6 percent this week. The loss for 2012 is 14 percent.
Brent oil for December slid $2.49, or 2.3 percent, to $105.68 a barrel on the London-based ICE Futures Europe exchange, the lowest settlement since July 31.
The resumption of operations at the Phillips 66 and Hess refineries, which have a combined capacity of 308,000 barrels a day, are contingent on post-storm assessments, according to the companies. Both were closed before Sandy hit and lost power after the storm made landfall Oct. 29 in southern New Jersey.
“Hurricane-related disruptions of refineries are weighing on the oil market,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “We could see a big inventory build in next week’s report because of the storm’s impact.”
Sandy left a swath of devastation across much of New Jersey, tearing apart seaside resorts, ripping houses from foundations and cutting power to about two-thirds of homes and businesses in the state.
“The refinery outage is bearish for oil,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion.
Inventories declined 2.05 million barrels to 373.1 million in the week ended Oct. 26, according to the Energy Department, the most for the last week of October in records begun in 1982. Domestic production rose to 6.67 million barrels a day, the most since 1995.
Oil also fell as equities declined and the euro slipped to a three-week low against the dollar after reports showed weak manufacturing in Europe and stronger-than-expected employment data in the U.S.
The Standard & Poor’s 500 Index slid 0.6 percent. The euro dropped as much as 0.9 percent to $1.2821. A stronger dollar and weaker euro reduce oil’s appeal as an investment alternative.
In the last jobs report before next week’s election, a net 171,000 workers were added to payrolls in October after a 148,000 gain in September that was more than first estimated. An advance of 125,000 was expected, according to a Bloomberg survey. The jobless rate rose to 7.9 percent from 7.8 percent as more people entered the labor force, the figures showed.
Euro-area manufacturing output contracted in October, adding to signs a recession in the currency bloc may extend into next year as leaders struggle to tackle the sovereign-debt crisis, data from London-based Markit Economics showed.
Oil also fell as traders waited to see whether U.S. voters re-elect President Barack Obama or choose challenger Mitt Romney on Nov. 6.
“You’ve got so much uncertainty surrounding Tuesday’s election,” O’Grady said. “I just don’t think anybody feels real confident taking any big positions.”
Oil may rise next week, a Bloomberg survey showed. Thirteen of 30 analysts, or 43 percent, forecast crude will increase through Nov. 9. Eleven respondents, or 37 percent, predicted a drop. Six forecast little change.
Electronic trading volume on the Nymex was 565,072 contracts as of 2:52 p.m. Volume totaled 421,661 contracts yesterday, 19 percent below the three-month average. Open interest was 1.60 million.