LONDON – Oil prices rose Wednesday on concerns over a storm in the Atlantic Ocean and the potential impact on the Gulf of Mexico, where oil and gas companies have significant production, refining and oil terminal operations.
Light, sweet crude for September delivery rose 45 cents to $72.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract had settled 76 cents higher at $72.38 a barrel on Tuesday.
September Brent crude futures rose 47 cents to $70.98 a barrel on the ICE Futures exchange in London.
Tropical Storm Dean got a little stronger late Tuesday in the Atlantic but remained far from land early Wednesday, forecasters said. Dean could reach hurricane strength by Friday as it moves over warm waters where atmospheric conditions were favorable for intensification, forecasters said. It is still too early to accurately determine the exact path of the storm.
"Oil prices picked up over the path that the tropical storm would take. There's projections for the path to go through various bits of oil infrastructure in the Gulf of Mexico so that's worried the market a bit," said Tobin Gorey, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Another depression — the fifth so far of the Atlantic hurricane season — formed late Tuesday and was expected to become a tropical storm before making landfall in Texas on Thursday morning, the National Weather Service said. If its wind speeds reach the 39 mph threshold for a tropical storm, it would be named Erin.
A tropical storm watch was issued for the Texas coast from Freeport, south of Houston, southward to the border.
Oil prices were still being affected by persistent volatility in equity markets, caused by worries about the effect of subprime U.S. mortgages — loans made to high credit-risk individuals.
"Crude oil clients are increasing their short crude oil positions," said Adrian Bingham-Walker, a dealer at CMC Markets in London. "Our clients ... seem to think that there is further scope for dips on top of what has already occurred."
Traders are also anticipating Wednesday's inventory report from the Energy Department's Energy Information Administration. Analysts surveyed by Dow Jones Newswires, on average, expect refinery utilization to rise by 0.5 percentage points to 91.8 percent in the week ended Aug. 10. The use rate dropped an unexpected 2.3 percentage points the previous week, renewing some concerns about gasoline inventories, which also dropped that week.
The EIA's report later Wednesday is expected to show crude oil inventories fell 2.1 million barrels last week with the slight boost in the refining rate. The analysts surveyed by Dow Jones also predict that gasoline inventories fell by 400,000 barrels last week, and that distillate stocks, which include heating oil and diesel fuel, rose by 1 million barrels.
Nymex heating oil futures rose 1.61 cents to $1.9986 a gallon (3.8 liters) while gasoline futures added 2.12 cents to $1.9950 a gallon. Natural gas prices gained 21 cents to $7.150 per 1,000 cubic feet.