NEW YORK – A tropical storm brewing in the Gulf of Mexico has helped boost the price of oil and refined energy products this week, a development that analysts say could lift fuel costs for consumers depending on the severity of the storm.
Tropical Storm Barry could make landfall as soon as late Friday along the Louisiana coast, potentially disrupting a key energy production and refining region with heavy rainfall and strong winds. Workers on offshore oil and gas platforms and rigs in the Gulf of Mexico have evacuated, and the Bureau of Safety and Environmental Enforcement estimates that more than half the area’s oil production has already been affected.
While few analysts expect significant long-term disruptions, the possibility of softer supply and weaker refinery activity has helped push up US crude futures nearly 5 percent for the week. Gasoline futures have also rallied and hit their highest level since late May on Wednesday, and diesel futures logged their largest one-day advance of the year this week with traders bracing for the storm impact.
The weather uncertainty has coalesced with production cuts by the Organization of the Petroleum Exporting Countries and allies, falling domestic stockpiles and tensions between the US and Iran to spark a swift reversal in energy markets just weeks after prices had tumbled. Some analysts had expected the slide in retail gasoline prices in May and June to benefit consumers this summer, but drivers could now face a sudden rebound at the pump.
“It’s going to hit the consumer in the pocket a little bit moving forward,” said Bob Yawger, director of the futures division at Mizuho Securities USA, adding that the relative price of gasoline to crude oil rose to its highest level in 14 months this week. “Folks are concerned about the refinery situation.”
In addition to the tropical storm, analysts have also been weighing the shutdown last month of the Philadelphia Energy Solutions refinery, the biggest refinery on the East Coast, following a fire and explosion there.
West Texas Intermediate futures, the US crude benchmark, added 0.2 percent to $60.32 a barrel on the New York Mercantile Exchange on Friday. Brent crude, the global gauge of prices, climbed 0.6 percent to $66.90 a barrel on London’s Intercontinental Exchange. Both measures have staged a powerful rally in recent days.
Despite the recent price rebound, some analysts caution that a dip in refining activity could also soften demand for crude oil, potentially limiting gains in energy markets. Many are wary that crumbling global growth amid trade tensions and steady US output will keep markets well supplied.
Investors were weighing a Friday International Energy Agency report showing oil supply exceeded demand in the first half of the year. The body left its estimate for 2019 demand growth the same, following a series of downgrades to consumption targets that sent prices spiraling lower.
“Everybody is warning that we’re in an oversupply situation and OPEC is going to have a very difficult future ahead of it,” Yawger said.
Elsewhere in commodities Friday, natural-gas futures rose 2 percent to $2.465 a million British thermal units on the New York Mercantile Exchange, also getting a boost from supply uncertainty surrounding the storm. Projections for warm weather that could lift power demand as more people turn on their air conditioners have also helped natural gas rebound recently.
The most-active Comex gold contract added 0.2 percent to $1,410 a troy ounce, while the most-active copper futures fell 0.4 percent to $2.6780 a pound.