Oil trimmed a fourth weekly decline as traders braced for the impact of Hurricane Harvey on a U.S. refining hub in the Gulf of Mexico.
Gasoline futures surged to the highest in four months.
Front-month crude futures rose 0.7 percent in New York, paring Thursday’s 2 percent decline. Gasoline gained as much as 4.6 percent. While some oil and gas production has shut in the Gulf, the storm is bearing down on an area in the U.S. state of Texas that is home to much of the nation’s refining capacity. If Harvey, currently a Category 2, makes the forecast landfall as a Category 3, it will be the strongest storm to hit since Wilma in 2005.
Oil in New York has lost almost 5 percent this month as investors weigh rising global output against supply cuts by members of the Organization of Petroleum Exporting Countries and its allies. While Harvey has curtailed some U.S. oil output, the greater impact could be on crude demand, with about 1 million barrels a day of refining capacity already shut down.
U.S. gasoline prices surged as Harvey moved closer to the coast, and Citigroup Inc. estimates more than 2 million barrels of motor fuel output may be impacted by the storm.
“It’s the gasoline market which is reacting strongly to the hurricane, with refining capacity in Texas shutting,” said Hamza Khan, head of commodities strategy at ING Bank NV. Any “potential damage that refineries in the region experience once the storm makes landfall” could “provide further support to gasoline prices.”
West Texas Intermediate for October delivery was at $47.76 a barrel on the New York Mercantile Exchange, up 33 cents, at 10:53 a.m. in London. Total volume traded was about 18 percent below the 100-day average. Front-month prices are down 1.5 percent this week.
U.S. gasoline prices for September rose to $1.7120 a gallon, the highest intraday price for a front-month contract since April. Ultra-low-sulfur diesel climbed as much as 2 percent to $1.6530 a gallon.
Brent for October settlement gained 36 cents, or 0.7 percent, to $52.40 a barrel on the London-based ICE Futures Europe exchange. Prices are down 0.6 percent this week. The global benchmark crude traded at a premium of $4.64 to WTI.
Report courtesy Bloomberg