NEW YORK--Crude oil futures prices settled modestly higher Friday as the market fixated on the potential track of Hurricane Sandy as it heads up the East Coast.
Prices of heating oil and gasoline futures, battered in recent days by weak demand, firmed on the uncertainty. The market's near-term course depends on how the storm plays out in coming day. Gasoline demand could spike on pre-storm sales, but turn sharply lower in coming weeks, if drivers can't traverse blocked or damaged roads. Barring serious storm damage to infrastructure, refineries, port facilities, and pipelines could see normal operations within days of the storm's passing.
Low inventories of gasoline and distillates (diesel/heating oil), especially in the Northeast, a possible landfall point, are a wild card for the market, but analysts noted that the bulk of the region's fuel supplies comes from the key Gulf refining hub. The Energy Information Administration said in its recent winter outlook that more than 60% of the area's heating oil needs are met by shipments from the Gulf. But supplies in that region are 20% below year-earlier levels, as they are in the Northeast.
"We're treading water until this storm plays out" next week, said Gene McGillian, a broker and analyst at Tradition Energy.
Light, sweet crude oil for December delivery settled 23 cents higher at $86.28 a barrel, while setting lower highs and lower lows than hit Thursday. ICE December Brent rose 1%, or $1.06 a barrel, to $109.55 a barrel, after a record that a blast closed one of two export pipelines from northern Iraq to Turkey.
The Commerce Department reported a 2% rise in U.S. third-quarter gross domestic product, higher than economist's expectations that the U.S. economy rose at a 1.8% rate in the quarter. The stronger signal gives rise to hopes that oil demand in the world's biggest petroleum user could recover from what government data show is a 2.2% year-to-date decline as of Oct. 19.
But analysts said the strong GDP figure clashed with concerns over lofty U.S. crude oil stocks that are the highest on 30 years of government data for this time of year. High inventories are sparked by a 15-year high in domestic output.
"The GDP figure has just stalled the slide to 3-1/2 month lows that we've been in," said Mr. McGillian. "It' was not enough to rally the market, but did dry up the selling pressure." Front-month crude oil futures moved in a broad range of $85-$93 a barrel in the past week after posting an intraday high above $100 in mid-September.
Hurricane Sandy is expected to make landfall anywhere from North Carolina to eastern Long Island, N.Y., by Tuesday morning, the National Hurricane Center reported. The storm claimed 21 lives in the Caribbean.
Nymex reformulated gasoline blendstock futures for November settled up 3.57 cents, or 1.2%, at $3.0978 a gallon. A record 10-day decline in which prices fell by 12%, or nearly 36 cents a gallon was halted Thursday as worries over Sandy grew.
November heating oil settled higher by 1.2%, or 3.57 cents, at $3.0978 a gallon on worries that the storm may further tight supplies. Heating oil futures had fallen nearly 22 cents, or 6.7%, in nine straight days before a modest rise on Thursday.
Copyright (c) 2012 Dow Jones & Company, Inc.
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