Oil Drops As Hurricane Sandy Dampens Demand On Crude And Fuel

Oil prices fell for a second consecutive day Tuesday as U.S. East Coast refineries production comes at a standstill and hurricane Sandy affects diesel and gasoline consumption in New York and other major cities.

The U.S. stock trading was canceled for a second day dragging down bond markets, as hurricane Sandy swept across New York City causing blackouts, record floods, shutting down New York’s financial district and causing billions of dollars worth of damage.

The Atlantic Ocean’s largest-ever tropical storm forced two-thirds of the region's refineries to halt production, which led to the closure of the biggest pipeline in the U.S. East Coast and kept most of the region’s major ports shut down.

More than 60 million Americans are expected inflicted by Sandy's aftermath, as experts believe that damages may reach to up to $100 billion; hundreds of schools, offices, shopping malls and restaurants have closed their doors and thousands of flights were cancelled.

Meanwhile, demand on diesel and gasoline is sharply falling as large cities are shut down by the superstorm, increasing oil reserves adding extra pressures on prices. Crude is trading, as of this writing, in a tight range around the $85.20.

Brent is trading around the $108.96 after falling more than 0.4%, yet its losses were limited by supply disruption fears, especially as refineries are seen struggling to restore operations due to power outages and flooding.

Crude oil is heading for the biggest monthly decline since May as investors are pricing in reduced demand for fuel after the almost-total shut down of eastern seaboard roads and airports – the East Coast is by far the largest consumer of gasoline in the U.S.

The U.S. Energy Information Administration (EIA) announced it will postpone the release of its weekly report on oil stockpiles and production from tomorrow because of storm-related delays. The data may be released on Nov. 1.

The U.S.’s oldest nuclear power plant, Oyster Creek facility, in New Jersey was put on alert last night due to elevated levels of in its water-intake structure. Inspectors were sent to monitor it and nine other facilities in the storm’s path.

Meanwhile, TransCanada and Phoenix Energy Holdings Ltd (a unit of PetroChina) agreed to develop a $3 billion oil pipeline to ship crude from Fort McMurray oil-sands production area to Edmonton. The project is expected to be in service by 2017.