NEW YORK – Crude futures gained more than 2 percent Tuesday, as scientists' predictions about the next Atlantic hurricane season and a fire at a Louisiana refinery renewed concerns about potential supply disruptions in the Gulf of Mexico.
Hurricane experts said the season should be an active one, but that this year's is unlikely to be as strong as in 2005.
Click here to visit FOXBusiness.com's Energy page.
Market participants said the prospect of hurricane season is just one of many factors encouraging funds to pour cash into commodities, which are coming off a big dive in an ongoing roller coaster of bargain-hunting and profit-taking.
"I could give you a plethora of reasons why we're here: hurricanes, Nigeria, Iran, Iraq — I could go on and on," said Steven Bellino, senior vice president of energy risk management for Fimat USA. He added, though, that it's more a case of commodities being a hot investment right now. "Prices are definitely ahead of themselves."
Still, going into hurricane season, which begins June 1 and runs through November, traders are going to be cautious about holding short positions in energy, said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.
"We're going to see continued high volatility ... but I tend to lean towards higher prices at this stage," Silliere said.
Light, sweet crude for July delivery rose $1.80 to settle at $71.76 a barrel Tuesday the New York Mercantile Exchange.
Brent crude for July delivery on the ICE Futures exchange rose $1.19 to settle at $70.54 a barrel.
Gasoline futures advanced nearly 4 cents to settle at $2.095 a gallon, while heating oil prices also rose more than 6 cents to settle at $1.9989 a gallon. Natural gas slipped 1.8 cent to settle at $6.258 per 1,000 cubic feet.
Meteorologists from the Miami-based National Hurricane Center said Monday the next Atlantic hurricane season could produce up to 16 named storms, six of them major hurricanes. The predictions suggest another active year but not the record pounding of 2005.
Some parts of the U.S. Gulf Coast are only starting to rebuild from Hurricane Katrina, the worst of last year's record 28 named storms — 15 of which were hurricanes, seven of them Category 3 or higher.
Last year's Hurricane Katrina, which made landfall on Aug. 29, severely disrupted the flow of oil and natural gas in the Gulf of Mexico and also caused the shutdown of onshore refineries and pipelines.
Additionally, a weekend fire at Valero Energy Corp.'s St. Charles, La., refinery cut gasoline production by about 25,000 barrels per day and halted the facility's low sulfur diesel production of 55,000 barrels a day, company officials said. It was unclear when the refinery — which refines some 260,000 barrels of oil daily — would be able to resume normal operations, but a company spokeswoman Denise Brady said gasoline production could resume by the end of the week.
Also supporting prices was news that Nigerian oil workers have threatened to strike over wages, snags at a couple of Gulf Coast area refineries as well as persistent concerns about how the West's standoff with Iran over its nuclear ambitions will affect that nation's oil exports.
Futhermore, markets are worried about industry nationalization. On Monday, Venezuela's oil ministry said it will ask the Supreme Court to repeal a law preventing the state oil company from holding a controlling stake in heavy oil projects in the Orinoco River basin.
President Hugo Chavez's administration has sought a larger share of profits from the industry amid surging oil prices. The average price of crude from Venezuela, the world's fifth-largest oil exporter, has more than doubled since 2003.
But worries about sluggish demand, rising supply, and slowing economic growth limited the increase in oil prices, analysts said.
Weekly U.S. government data on Wednesday is expected to show builds in stocks of petroleum-products such as gasoline, as refinery runs increase, a Dow Jones survey of energy analysts showed.
The analysts also estimated crude oil inventories would show a decline of 400,000 barrels, on average.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox