LONDON: Oil prices rose on Friday as companies start to shut down oil and gas facilities in the Gulf of Mexico owing to Tropical Storm Karen, analysts said.
Traders were growing increasingly concerned at the lack of a breakthrough in the US budget stand-off that has closed parts of the government.
New York’s main contract, West Texas Intermediate for delivery in November, climbed 33 cents to $103.64 a barrel. Brent North Sea crude for November gained 31 cents to stand at $109.31 a barrel in London midday deals.
“Prices are likely to retain a premium as Tropical Storm Karen makes landfall in the US shutting a number of key oil production sites in the US where winds are expected to be hurricane force,” said Joe Conlan, analyst at British energy consultancy Inenco.
Obama has demanded an end to the four-day government crisis he decried as a reckless “farce”, piling pressure on Republicans to give up on their demands that he delays implementation of his healthcare law.
However, the main concern about global investors is the possibility that the row will drag on into mid-October, when the government reaches its spending limit and is unable to pay its bills or service its debts. Singapore-based Phillip Futures said in a note: “We expect market tension particularly in the form of weakening dollar and declining equities to continue and intensify respectively.”
A weak dollar is also supportive for oil prices as it makes the commodity cheaper for buyers holding rival currencies, boosting demand.
Crude futures had begun the week by striking multi-month low points on Monday ahead of the shutdown.
But they recovered mid-week as news that TransCanada’s southern leg of its Keystone pipeline was near completion offset official data showing a larger-than-expected jump in US crude stockpiles.
According to media reports, TransCanada was nearly finished building its Gulf Coast pipeline, which will add another 700,000 barrels per day of capacity to move crude oil from the Cushing, Oklahoma delivery point for crude oil to the Texas Coast.
The opening of the pipeline could lessen the backup of crude flows into the Cushing depot, which has helped depress prices over the past couple years. afp
