Oil Slips as Strong Dollar, Cushing Stock Build Outweigh Gordon
(Bloomberg) -- The crude market shrugged off Tropical Storm Gordon’s threat to U.S. oil assets amid a stronger dollar and a potential build at the Cushing, Oklahoma, storage hub.
Futures closed 0.1 percent higher Tuesday, erasing nearly all of the session’s gains. Strength in the dollar and expectations of a 600,000-barrel increase in Cushing supplies last week weighed on the benchmark, overshadowing any impact from Tropical Storm Gordon as it approaches the U.S. Gulf Coast.
“The market had an initial reaction to the first real threat we had this year and then realized that it’s not much of a threat,” said James Williams, president of London, Arkansas-based energy researcher WTRG Economics. “We’re not going to see refinery damage like we did last year with Harvey. It doesn’t look like it.”
The U.S. crude benchmark posted a 1.5 percent gain in August and Brent also rose as investors focused on the impact Iranian sanctions are having on global crude markets. Yet, President Hassan Rouhani said Iran will keep selling oil in spite of an expected resumption of sanctions on the country’s crude shipments. Traders are also watching for whether OPEC will fill any supply gaps after crude production from the group rose in August to the highest level this year.
West Texas Intermediate for October delivery added 7 cents to settle at $69.87 a barrel on the New York Mercantile Exchange. Monday trades will be booked Tuesday because of the U.S. holiday. Average volume traded Tuesday was about 12 percent above the 100-day average.
The Bloomberg Dollar Spot Index rose as much as 0.7 percent on Tuesday, diminishing the appeal of dollar-denominated commodities.
“The dollar is leaning on the market,” said Bob Yawger, director of the futures division at Mizuho Securities USA LLC. Meanwhile, Gordon “doesn’t look like it’s going to tear up the oil patch in the Gulf.”
Brent for November settlement climbed 2 cents to end the session at $78.17 a barrel on the ICE Futures Europe exchange. The global benchmark crude traded at a $8.61 premium to WTI for the same month.
Tropical Storm Gordon is expected to become a hurricane sometime Tuesday and is headed for the U.S. Gulf of Mexico coast. More than 9 percent of U.S. Gulf of Mexico offshore oil production is shut in, according to the Bureau of Safety and Environmental Enforcement.
Anadarko Petroleum Corp. stopped production and removed all personnel from two Gulf of Mexico platforms, Chevron Corp. also shut in production at a Gulf of Mexico facility and Exxon Mobil Corp. initiated a controlled shutdown of its Mobile Bay facilities offshore Alabama.
So far, operations at U.S. refineries in the storm’s path have not been affected.
Other oil-market news:
- Gasoline futures for October delivery slipped 0.1 percent to settle at $1.9942 a gallon.
- U.S. crude stockpiles are seen declining 2.75 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg.
- Schlumberger Ltd. said the U.S. hydraulic-fracturing market has run into more trouble than expected and cast doubt on how much America’s busiest oil patch can expand.
- The top three executives of Mercuria Energy Group Ltd. bought a 6.7 percent stake in the oil trader’s parent from three of its Eastern European founders in July, according to a filing.
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