Oil prices fell on Monday in international markets due to the shutdown of refineries on the U.S. East Coast ahead of Hurricane Sandy’s impact, which reduced the production of petroleum products in the world’s largest consumer.
The price of a barrel of crude oil was down $1.04 on the London market, settling at $108.51. In the U.S. market, a barrel traded at a price 60 cents lower, at $85.68.
Fifty million people in the stretch from the Mid-Atlantic region of the U.S. to Canada will be affected by Hurricane Sandy, which forecasters warn could be the most severe of all recorded in the continental U.S. It is expected to hit the U.S. East Coast on Tuesday morning.
The second-largest refinery in the region has begun to suspend production, and three others have reduced output due to the severe storm that could bring flooding and disrupt power supply across the country.
Analysts warn that the hurricane will likely dampen oil consumption in the U.S., given the disruption of intercity and urban transport and the cancellation of flights in the region.
-Michael Creed from Melbourne’s National Australia Bank speculates that due to reduced processing at refineries, crude oil inventories are likely to rise, which may currently be pressuring prices.
The stock markets were also weighed down, as investors focused on weak corporate earnings, and the euro weakened by 0.3 percent against the dollar.
-Eugen Weinberg from Frankfurt’s Commerzbank concludes that today, risk aversion clearly prevails. Risk aversion is strengthening across all markets, and investors are increasingly focusing on the slowing growth of the global economy, he adds.
The Organization of the Petroleum Exporting Countries (OPEC) announced on its website on Monday that the price of its reference basket of oil was $106.37 on Friday, which means it was 54 cents higher than the previous trading day.
