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Oil steady ahead of Storm Gordon; weighed by dollar, Cushing build
[NEW YORK] Oil prices were little changed on Tuesday, as energy infrastructure on the US Gulf Coast braced for a hurricane, but gains were capped as a stronger dollar and report of rising stockpiles at the Cushing, Oklahoma hub weighed.
US West Texas Intermediate (WTI) crude futures rose 7 cents to settle at US$69.87 a barrel after earlier hitting a session high of US$71.40. US markets were closed on Monday for Labour Day.
Brent crude, which traded on Monday, was ended 2 cents firmer to settle at US$78.17 a barrel, down from a session high of US$79.72.
Both benchmarks jumped earlier in the session as more oil producers pulled employees out of Tropical Storm Gordon's path and shut-in 9 per cent of US Gulf of Mexico oil and gas production on Tuesday.
But the storm, expected to make a nighttime landfall as a category 1 hurricane, shifted eastward, reducing its threat to major production areas and most Gulf Coast refineries.
Vessel traffic along the US Gulf Coast was also under restrictions ahead of Gordon.
The Gulf of Mexico is home to 17 per cent of US crude oil production and 5 per cent of natural gas output daily, according to the US Energy Information Administration. On land, the Gulf Coast serves as a major US refining hub.
Prices moved lower, however, as market participants saw the market as overbought.
"Initial reaction this morning appeared exaggerated as disruption to Gulf of Mexico production infrastructure isn't likely to extract a major amount of crude from the market," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. "The larger impact of the storm is apt to fall on Gulf coast refinery activity that could be affected by power outages."
Weighing on oil prices, Cushing, Oklahoma, crude inventories rose nearly 754,000 barrels from Aug 24 to Friday, traders said, citing a report from market intelligence firm Genscape.
A rising US dollar index also pushed crude futures lower. A stronger dollar makes greenback-denominated oil more expensive for holders of other currencies.
Global oil markets have tightened over the last month, pushing up Brent prices by more than 10 per cent since the middle of August. Investors anticipate less supply from Iran as US sanctions on Tehran begin to bite.
Harry Tchilinguirian, oil strategist at BNP Paribas, warned of "supply issues" into 2019.
"Crude oil export losses from Iran due to US sanctions, production decline in Venezuela and episodic outages in Libya are unlikely to be offset entirely by corresponding rises in Opec production," Mr Tchilinguirian said.
BNP Paribas expects Brent to average US$79 in 2019.