NEW YORK Oil prices rose on Tuesday as Hurricane Isaac approached the U.S. Gulf Coast, forcing companies in the region to close down oil production platforms and refineries.
Isaac strengthened into a Category 1 hurricane and was expected to reach the coast of Louisiana late on Tuesday.
More than 90 percent of U.S. Gulf of Mexico oil production was shut on Tuesday, along with 936,000 barrels per day of Gulf Coast refinery capacity.
Late on Tuesday, Group of Seven finance ministers issued a statement saying they were ready to call on the IEA to take appropriate action to ensure the market was fully supplied and that they remain vigilant toward risks to the global economy posed by elevated oil prices.
"The statement from the G7 suggests, in part, that they are also sensitive to price, but if you have to focus on a supply disruption to authorize a release, we have one in the Gulf of Mexico called Isaac that has had a real impact on production," said Jan Stuart, head of energy research at Credit Suisse.
Brent October crude rose 32 cents to settle at $112.58 a barrel, having fallen to $111.71 but finding support ahead of the 200-day moving average of $111.45. Brent's session peak was $113.10.
U.S. October crude gained 86 cents to settle at $96.33 a barrel, after reaching $96.54.
The Gulf Coast refining interruptions pressured crude futures on Monday on expectations that less crude oil will be needed by refineries and that Isaac, a weaker storm than the 2005 category 3 Hurricane Katrina, will do less damage to offshore production.
"The wave heights are much lower (than Katrina) so we expect less damage," said Tom Larsen, senior vice president of disaster modeler Eqecat Inc.
U.S. heating oil futures edged higher, but RBOB gasoline futures fell almost 3 cents, hit by profit taking after rising more than 7 cents on Monday.
Front-month September heating oil and gasoline contracts expire on Friday.
Gulf Coast cash gasoline differentials fell sharply from Monday's premiums to benchmark October RBOB futures as fewer refineries than expected fully shut down, traders said.
VIEWS ON RESERVES RELEASE DIFFER
The head of the International Energy Agency (IEA) on Tuesday reiterated her opposition to an oil reserves release.
Maria van der Hoeven, the Dutch IEA's executive director, said higher oil prices alone did not justify a release and world oil markets could cope with the loss of Iranian exports, hit by U.S. and European sanctions against Tehran.
The G7 statement highlighted the threat to global economic growth from high oil prices and also encouraged "oil-producing countries to increase their output to meet demand."
Earlier on Tuesday, U.S. President Barack Obama warned Gulf Coast residents to make preparations ahead of the storm, but in an appearance on television did not mention any potential release of Strategic Petroleum Reserves.
A White House spokesman said later that the option of tapping reserves remained on the table, "but we have no announcements to make today.
Brent and U.S. crude futures slipped ahead of Obama's statement on the possibility a release would be announced and, separately, on a report showing weakened U.S. consumer confidence.
U.S. OIL INVENTORIES
U.S. crude oil stocks rose 5.5 million barrels last week, the American Petroleum Institute said in a report on Tuesday, against expectations for a stocks drop.
Gasoline stocks fell 2.4 million barrels and distillate stockpiles rose 1.4 million barrels, the API said. <API/S>
Crude stocks were expected to be down 1.5 million barrels, according to a Reuters survey of analysts taken ahead of weekly inventory reports. <EIA/S>
Gasoline stocks were seen down 1.4 million and distillate inventories were expected to have remained steady, down only 100,000 barrels.
The report from the U.S. Energy Information Administration will follow on Wednesday at 10:30 a.m. EDT.
(Additional reporting by Kristen Hays and Erwin Seba in Houston, Joshua Schneyer and David Sheppard in New York, Peg Mackey in London and Ramya Venugopal in Singapore; Editing by David Gregorio and Jim Marshall)