(Bloomberg News) Oil headed for its first weekly gain in five as investors weighed the likelihood the U.S. will take further steps to bolster the economy amid signs growth is slowing. Gasoline extended gains as Hurricane Irene threatened to disrupt production.
Futures fluctuated in New York and London before a speech by Federal Reserve Chairman Ben S. Bernanke today and a report that may show U.S. economic growth dropped in the second quarter. Gasoline rose, after climbing to a three-week high yesterday, on speculation Irene may reduce East Coast refinery output and fuel distribution. Brent's premium to U.S. futures widened for a second day.
"If Bernanke announces some sort of substantive program, probably a third round of quantitative easing, that's going to tend to support commodity prices including crude," said John Vautrain, a senior vice-president at Purvin & Gertz Inc., an industry consultant in Singapore. "There's a market expectation that he would probably do that but at the same time, there's some possibility he won't."
Crude for October delivery was at $85.15 a barrel, down 15 cents, or 0.2 percent, in electronic trading on the New York Mercantile Exchange at 2:20 p.m. in Sydney. The contract yesterday gained 14 cents to $85.30, the highest since Aug. 23. Prices are 3.5 percent higher the past week and up 16 percent the past year.
Brent oil for October settlement was at $110.70, up 8 cents, on the London-based ICE Futures Europe exchange and is 1.9 percent higher this week. The European benchmark contract was at a premium of $25.52 to U.S. futures, compared with a record $26.21 on Aug. 19.
Brent's premium to New York's West Texas Intermediate shrank the most in five weeks on Aug. 22 after Libya rebels entered Tripoli, paving the way for the country's oil production to resume. The spread has since widened as Libyan leader Muammar Qaddafi eluded capture, stoking speculation a resumption in output may take longer than first hoped.
Irene, a Category 3 hurricane, was 490 miles (788 kilometers) south-southwest of Cape Hatteras as of 11 p.m. in Miami yesterday, according to the National Hurricane Center. Irene is expected to strike North Carolina this weekend as it moves up the U.S. coast. Governors from North Carolina to Connecticut issued emergency declarations.
The U.S. East Coast has 10 operating oil refineries with a capacity of 1.21 million barrels a day, according to Energy Department data. The area accounts for 7.1 percent of total U.S. operating capacity.
"Focus was not only on today's speech by Fed Chairman Bernanke but also on the approach of Hurricane Irene," Tom Pawlicki, a Chicago-based analyst at MF Global Holdings Ltd., said in a note. "The issue for the energy markets will be the refineries in the area and the prospect that the storm inhibits the flow of crude oil into and products out of the facilities."
Gasoline for September delivery rose 0.21 cents to $2.97 a gallon on the New York Mercantile Exchange. Futures yesterday climbed 8.95 cents, or 3.1 percent, to $2.9679, the highest close since Aug. 2.
Oil has gained this week amid speculation the Fed will announce further steps to bolster the U.S. economy. Bernanke will speak at the annual Fed symposium in Jackson Hole where European Central Bank President Jean-Claude Trichet will also make a presentation.
U.S. gross domestic product grew at a 1.1 percent annual pace in the second quarter, down from the 1.3 percent that the government estimated last month, according to the median of responses in a Bloomberg News survey of economists.
Crude prices may drop next week as Libyan rebels consolidate their hold on the country and begin taking steps to restore crude exports, a Bloomberg News survey showed.
Seventeen of 34 analysts, or 50 percent, forecast oil will decline through Sept. 2. Nine respondents, or 26 percent, predicted prices will increase and eight estimated there will be little change during the period. Last week 42 percent of surveyed analysts projected a decline.