CRUDE OIL FUTURES: Nymex Crude Opens Early on GLOBEX Ahead Of Gustav

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By Brian Baskin and Grainne McCarthy

OF DOW JONES NEWSWIRES

 

August 31, 2008 15:47 ET (19:47 GMT)

 

NEW ORLEANS (Dow Jones)--Crude oil futures jumped at the open of electronic trading Sunday, as the energy industry braced for the onslaught of Hurricane Gustav.

 

Moving to respond to potential energy price movements ahead of Gustav, the Nymex opened electronic trading early on Sunday. All energy products trading on the electronic platform opened for trading at 2:30 p.m. EDT Sunday. Light, sweet crude futures for October delivery were up $2.13. or 1.8%, at $117.59 a barrel, off a session high of $118.39.

 

The products, which include benchmark crude oil, gasoline and natural gas futures, were originally scheduled to start trading at 6 p.m. Sunday. Pit trading on the floor of the Nymex is closed Sunday and Monday for the Labor Day holiday. The shift in electronic trading hours gives investors greater time to hedge their bets ahead of Gustav.

 

Trade appeared to be light and the modest nature of the move underscored a reluctance to act until Gustav has made landfall and the extent of any long term damage to Gulf Coast energy infrastructure becomes apparent. Producers have shut in 1.3 million barrels a day, or 96% of production in the Gulf of Mexico, according to the U.S. Minerals Management Service, but can restore that output within days to undamaged platforms.

 

Overriding concerns about the state of U.S. energy demand are also limiting moves higher in oil prices.

 

"I don't know if the market is more concerned about softening in demand than they are for a lack of production," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "Now we're getting closer to the event and so there may be a little bit more nervousness."

 

Flynn expects oil futures to trade to the higher end of their current range - around $120 a barrel. Then, the market "will basically wait until we see what happens with the storm and how much damage is actually done," he added.

 

Gasoline futures recently traded at $2.9525 a gallon, down from Friday's settlement of $3.0099 a gallon. Fuel is expected to be in short supply, as Louisiana residents flee by car and refineries shut down ahead of the storm. Nine refineries with a total capacity of2.2 million barrels a day, or 12.5% of the U.S. total, have shut down, in the New Orleans area and at the Texas-Louisiana border. The Gulf Coast is home to about 40% of U.S. refining capacity.

 

The market appears to be trading the difference between fuel and crude prices for refiners, instead of the gasoline contract itself, said Tony Rosado, a broker with GA Global Markets. The difference, known as the gas crack, is up about $1.70 to $6.30, indicating that traders believe demand will stay strong even as spare supplies dwindle.

 

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-fs