Weather news boosts energy futures prices
It was a break in recent selling. Still, the "storm premium" was moderate, as traders fretted about credit and liquidity.
NEW YORK - Energy futures prices rebounded from their morning lows yesterday as traders bought on news that a tropical storm is forming in the Atlantic Ocean and on a report of a refinery problem.
A weather disturbance "just left the coast of Africa, and it looks like it has a little bit of teeth," said James Cordier, president of Liberty Trading Group in Tampa, Fla.
Forecasts show the disturbance has the potential to develop into a tropical storm and strike the Gulf of Mexico within two weeks, said Addison Armstrong, an analyst at TFS Energy Futures L.L.C. in Stamford, Conn.
The news injected some buying into a market dominated by selling lately.
Still, the new "storm premium" was moderate as the same credit and liquidity concerns roiling equity markets continued to weigh on energy traders. That overshadowed the effect of the storm forecast and a prediction from an international watchdog agency of tight supplies of oil amid growing demand over the next two years.
Light, sweet crude for September delivery fell 12 cents to settle at $71.47 a barrel in trading on the New York Mercantile Exchange, ending the week down 5.3 percent. September gasoline rose 2.08 cents to settle at $1.9548 a gallon, ending the week off 3.7 percent. Both contracts had traded sharply lower early yesterday, then rose into positive territory amid fears that the storm could disrupt oil and gas supplies from the Gulf of Mexico.
It is far too early to tell whether a storm will develop or what course it will take, but it is the first serious threat of tropical weather this season, analysts said. An extremely destructive hurricane season in 2005 was followed by a very light season last year, when no hurricanes hit the United States.
Prices also were supported by news that a ConocoPhillips facility in Linden, N.J., that is closed for maintenance had delayed a planned restart. But the company also said it is restarting its Trainer, Pa., refinery, which can process 185,000 barrels of oil daily. "Things are starting back up there," Conoco spokeswoman Terry Hunt said of the Delaware County plant.
Analysts said worries were escalating that the economy would be hurt by the spreading credit crunch, which could cut demand for gas and oil.
"We're going to have a slowdown, and we're going to need fewer barrels" of oil, Cordier said.