Oil futures jumped more than $1 a barrel Monday as a cyclone bore down on the Persian Gulf, even as retail gasoline prices continued their slow retreat from their recent highs.
Concerns about refinery capacity also supported oil prices.
The average national price of a gallon of gasoline at the pump dipped to $3.158 Monday, down 0.6 cent overnight and off 6.9 cents from its May 24 high, according to AAA and the Oil Price Information Service.
Light, sweet crude for July delivery, however, rose $1.13 to settle at $66.21 a barrel on the New York Mercantile Exchange, while gasoline futures for July fell 0.66 cent to settle at $2.238 a gallon on the Nymex.
In other Nymex trading, heating oil futures rose 4.18 cents to settle at $1.9646 a gallon, and natural gas prices jumped 31.3 cents to settle at $8.191 per 1,000 cubic feet.
The July Brent crude contract gained $1.33 to $70.40 a barrel on the ICE Futures exchange in London.
Tropical Cyclone Gonu, an Indian Ocean storm expected to hit Oman by the middle of the week, weighed heavily on the market, said John Person, an independent energy trader and president of NationalFutures.com. The storm is expected to lose power, but coupled with the remnants of Tropical Storm Barry, which lashed the Northeast Monday morning, it served to remind traders that hurricane season is upon us.
“All of a sudden, people look at the weather chart and see green,” Person said.
Markets remain unsettled by tight gasoline supplies in the U.S., analysts said. Those concerns were stoked by the storm and by Friday's news that BP PLC told some Canadian suppliers it would not be able to take delivery of all the crude it had contracted to buy for its 420,000 barrel per day Whiting, Ind., refinery.
Parts of that facility have been down since April due to a fire and a power outage. Traders had expected the refinery to be back online in a couple of weeks, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. The company is now saying the shuttered parts of the plant will not return to service until late summer.
“That's one of the biggest refineries in the country,” Flynn said.
BP officials, however, said the refinery continues to produce near-normal amounts of gasoline. The closed parts of the plant process about 150,000 barrels per day of heavy, sour Canadian crude. The rest of the plant, which processes light, sweet crude, is up and running.
“We're actually increasing gasoline production by optimizing our use of light crude,” said BP spokesman Scott Dean.
Guy Caruso, head of the Energy Information Administration, on Monday reiterated his call for the Organization of Petroleum Exporting Companies (OPEC) to increase production to ensure adequate supplies of crude. Caruso first called on OPEC to increase production in Congressional testimony on May 22.
Concerns about supply disruptions trumped news that a Nigerian opposition group had declared a one-month ceasefire, which could offer newly inaugurated Nigerian President Umaru Yar'Adua an opening to solve the crisis that has roiled Africa's oil giant, a leading exporter of crude to the United States.
Traders are also beginning to worry about Russia, where there are suggestions President Vladimir Putin could revoke a BP oil contract, Flynn said.
“There's a rising concern about Russia and their nationalization of natural resources,” Flynn said.
