Oil Rises as Hurricane Ike Strengthens, Raising Supply Concerns

By Alexander Kwiatkowski and Grant Smith

Sept. 4 (Bloomberg) -- Crude oil rose for the first time in five days as Hurricane Ike gained force in the Atlantic, causing concern that U.S. oil supplies may be disrupted.

Crude rose after Ike, the third major storm of the Atlantic season, strengthened into a Category 4 hurricane, raising speculation it may head for the Gulf of Mexico, home to more than a fifth of U.S. oil production. Platforms and refineries in the area are still resuming production after hurricane Gustav passed by earlier this week.

``We are only at the beginning of the peak months of the hurricane season statistically,'' said Andy Sommer, an analyst with HSH Nordbank in Hamburg. ``There is still a risk of supply disruptions.''

Crude oil for October delivery rose as much as $1.25, or 1.1 percent, to $110.60 a barrel on the New York Mercantile Exchange, trading for $110 at 1:31 p.m. London time. Prices have fallen 24 percent from a record $147.27 on July 11.

Packing winds of nearly 145 miles (230 kilometers) per hour, Ike was moving west-northwest with its eye 550 miles northeast of the Leeward Islands, the U.S. National Hurricane Center said today in an online advisory just before 5 a.m. Miami time.

A forecast on the center's Web site shows Ike may be over the Bahamas, about 200 miles east of the Florida Keys, by Tuesday. Hurricane Hanna, a storm closer to the U.S., is heading for the southeast coast of the U.S., missing the Gulf area.

Moving Averages

The average price of New York crude for the past 50 days fell below the 100-day moving average today. Prices fell this week as low as $105.46, the lowest since April, after Gustav, the most powerful storm since Katrina and Rita in 2005, caused little damage to Gulf of Mexico production.

``Ike will need to be on constant watch,'' said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland. ``We have so far not seen one report of any structural damages caused by Gustav to upstream or downstream oil assets.''

Brent crude oil for October settlement rose as much as $1.10, or 1 percent, to $109.16 a barrel on London's ICE Futures Europe exchange. The contract traded at $108.50 at 1:31 p.m. London time.

Analysts were split over whether a government report will show that U.S. crude-oil inventories rose or fell, a Bloomberg News survey of analysts showed.

Supplies of crude oil probably rose 450,000 barrels in the week ended Aug. 29 from 305.8 million barrels the prior week, according to the median of responses by 14 analysts before an Energy Department report tomorrow. Eight expected an increase and six expected a drop.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net