Preparations were under way Sunday for the arrival of Tropical Storm Marco, in Empire, La. A second storm is forecast to hit the state on Thursday.
Photo: Gerald Herbert/Associated PressGasoline futures surged to their highest level since early March Monday, lifted by energy supply disruptions caused by back-to-back storms that are on track to hit the Gulf of Mexico this week.
U.S. gasoline futures for delivery in September added 6.5% to $1.3671 a gallon on the New York Mercantile Exchange, posting their largest one-day advance since mid-May. They ended the day at their highest level since March 6.
U.S. crude-oil futures for October delivery, meanwhile, advanced 0.7% to $42.62 a barrel, while Brent crude, the global gauge for oil prices, gained 1.8% to $45.13 a barrel. Energy prices have pared some of their 2020 declines caused by the coronavirus in recent weeks but still remain well below where they started the year.
More than 15% of U.S. oil production is based in the Gulf Coast region and nearly half of all U.S. refineries are located there. That means even a temporary closure of production facilities could weigh on supply, according to Commerzbank. Ahead of the two storms, more than half of oil production in the area was shut down Sunday, according to the Bureau of Safety and Environmental Enforcement.
“There are some worries about a potentially volatile week ahead” for oil prices, said Ole Hansen, head of commodity strategy at Saxo Bank. “Apart from the Middle East, the U.S. Gulf Coast is really the most important energy hub in the world.”
Forecasters warned that Tropical Storm Laura, which is expected to make landfall Wednesday or Thursday in Louisiana or Texas, could develop into a powerful hurricane. That storm comes on the heels of Tropical Storm Marco, which was approaching the Louisiana coast Monday afternoon and could bring flooding to the region.
In addition to shutting in oil production, companies have been securing refineries and petrochemical plants in the area. Still, the price boost triggered by the two storms is likely to be short-lived, some analysts said. Oil inventories remain high and outlook for demand is still uncertain as the coronavirus weighs on travel and reduces the need for fuel.
“We have seen quite a serious fall in U.S. oil demand,” said Tamas Varga, analyst at brokerage PVM Oil Associates. “If you have the same sort of data this week, it will not bode well for oil prices,” he added, looking ahead to the weekly report on stockpiles of crude oil and fuel, due from the Energy Department on Wednesday.
New cases of coronavirus are likely to weigh on economic activity globally, keeping prices capped even as the NOAA predicts this year will see a more active Atlantic hurricane season than usual.
“With these two tropical storms, hurricane season is still continuing so we are likely to have more hurricanes formed over the next three months,” said Eugen Weinberg, head of commodity research at Commerzbank. “At the moment, the market is not pricing this particular risk.”
—Joe Wallace contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
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Oil and Gasoline Prices Climb Ahead of U.S. Gulf Coast Storms - The Wall Street Journal
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