Crude oil and fuel prices edged down after hurricane Sandy hit the US east coast, closing refineries as well as ports and terminals, raising the spectre of reduced demand.
Petrol, or gasoline, prices, which had jumped on Monday ahead of the arrival of one of the biggest storms to hit the US, also fell on profit-taking on expectations of lower consumption after the closure of roads and airports.
Many of the ports and crude terminals on the east coast, where Sandy landed, shut down, while there were also reports of damage to oil pipelines.
The New York harbour is dotted by tank complexes owned or leased by companies including Morgan Stanley and Global Partners, a fuel distribution and logistics business. It is an important international trading hub, drawing petrol cargoes from Europe to supply metropolitan areas such as New York and Boston.
ICE December Brent was down 9 cents in London morning trading at $109.35 a barrel while Nymex December West Texas Intermediate fell 3 cents to $85.51 a barrel. Floor trading will be closed on the New York Mercantile Exchange, as the building occupies a flood evacuation zone.
The gasoline benchmark, Nymex November RBOB, which rallied more than 4 per cent on Monday, fell $0.0184 to $2.7384 a gallon. Nymex November heating oil eased to $3.1125 a gallon.
Both November futures contracts stop trading on Wednesday, creating the risk of a scramble to unwind positions amid reduced exchange trading volumes. When gasoline futures for October delivery expired last month, prices surged as much as 8.9 per cent in a day.
The Department of Energy said New York and Long Island harbour were among those which had closed. Phillips 66 said it shut down its 238,000 barrel-per-day Bayway refinery on the New Jersey side of the port as well as three storage terminals.
At the 330,000 b/d Philadelphia, Pennsylvania, refinery recently purchased by Carlyle Group, process units were shut down or on standby, the company said. Refineries elsewhere in the region were also shutting down or reducing operating rates, according to news agencies.
Traders and analysts debated the impact on fuel supply and demand. Citigroup estimated petroleum demand could fall 1.5m-3m barrels cumulatively by Saturday.
“The market has been concerned about supply, but demand is going to plummet from Washington to Connecticut over the next couple of days as people stay home,” said Andy Lipow, president of consultants Lipow Oil Associates in Houston.
However, BNP Paribas said: “While hurricane Sandy will be accompanied by a short-term negative transport demand shock, we think the market will still focus on lost product supply.”
Retail petrol prices have been falling since late September as refiners switch to cheaper winter-specification fuel. The east coast refinery outages suggested a slowdown in demand for crude oil in the Atlantic basin market.
