Picture: REUTERS
Picture: REUTERS

New York — Oil prices rose on Tuesday as the market prepared for potential supply disruptions due to a hurricane forecast to hit the US Gulf Coast, but gains were capped by a report that Cushing, Oklahoma, stockpiles rose last week.

US West Texas Intermediate (WTI) crude futures rose 32c to $70.12 a barrel by 3.34pm GMT after hitting a session high of $71.40. US markets were closed on Monday for the Labor Day holiday. Brent crude, which traded on Monday, was up 20c at $78.35 a barrel, down from a session high of $79.72.

Both benchmarks jumped earlier after the evacuation of two Gulf of Mexico oil platforms in preparation for Tropical Storm Gordon. The storm is expected to become a Category 1 hurricane, making landfall near the Mississippi-Alabama border.

Vessel traffic along the US Gulf Coast on Tuesday was under restrictions ahead of Gordon. The Gulf of Mexico is home to 17% of US crude oil production and 5% of natural gas output daily, according to the US Energy Information Administration (EIA). On land, the Gulf Coast serves as a major US refining hub.

Prices moved lower in mid-morning trading, however, as market participants saw the market as overbought, said Phil Flynn, analyst at Price Futures Group in Chicago. “That doesn’t mean the storm premium buying is over by any stretch of the imagination,” Flynn said. “It was just a little ahead of itself. There are still a few hours to see what the storm is going to do and what other infrastructure is going to be impacted.”

Prices also pulled back from earlier highs after Cushing, Oklahoma, crude inventories rose nearly 754,000 barrels from August 24 to Friday, traders said, citing a report from market intelligence firm Genscape.

Global oil markets have tightened over the past month, pushing up Brent prices by more than 10% since the middle of August. Investors anticipate less supply from Iran as US sanctions on Tehran begin to bite.

Harry Tchilinguirian, oil strategist at BNP Paribas, warned of “supply issues” into 2019. “Crude oil export losses from Iran due to US sanctions, production decline in Venezuela and episodic outages in Libya are unlikely to be offset entirely by corresponding rises in ‘OPEC-plus’ production.”

BNP Paribas expects Brent to average $79 in 2019.