Oil prices offset production decline; gas prices 25% higher than in early July

The Associated Press

Oil prices climbed in early August as energy traders kept an eye on supply threats ranging from a tropical storm in the Caribbean to fighting in the Middle East.

Natural gas futures gave up more than half of the gains from a July 31 rally fueled by a weather-induced surge in electricity demand.

Still, natural gas prices are roughly 25 percent higher than they were in early July, in part reflecting the market’s nervousness about the Gulf of Mexico hurricane season.

The U.S. National Hurricane Center said Tropical Storm Chris has formed near the Leeward Islands in the Caribbean, raising traders’ fears that it could strengthen and damage oil platforms and refineries along the Gulf Coast.

“In the back of everybody’s minds is the possibility of getting one or two hurricanes like Katrina or like Rita,” said Cameron Hanover Inc.’s Peter Beutel. Those storms disrupted oil and natural gas output, as well as oil refining, for months, forcing the United States to import large amounts of fuel from Europe.

Light sweet crude for September delivery rose 51 cents to settle at $74.91 a barrel on the New York Mercantile Exchange. Gasoline futures jumped more than 6 cents to settle at $2.2762 a gallon. Heating oil futures rose 4.28 cents to $2.0804 per gallon.

The strength in gasoline came as refiner Valero Energy Corp. said units at two plants in Louisiana and Texas would be shut for a week for repairs.