Brent Slips Ahead of Hurricane Sandy
Brent crude oil slipped below $109 on Monday morning, as the U.S. prepared for Hurricane Sandy. The storm, expected to hit the East coast of the U.S. late Monday or early Tuesday, could be the largest storm in US history. Dubbed “Frankenstorm," Hurricane Sandy is expected to produce 85 mph winds and meteorologists have warned that New York City could face an 11 foot wall of water.
Reuters reported that in preparation, most U.S. refineries on the east coast have shut down. This includes New Jersey plant Phillips 66 (NYSE: PSX), the second largest in the country. The shutdown is expected to create a build-up in crude stockpiles, driving prices lower.
As the storm moves closer, investors will have their eyes on reports of damage to infrastructure in the energy sector, namely refineries. The severity of the storm and length of the refineries' shutdowns will determine the effect on Brent prices.
Also driving prices downward is the reopening of Buzzard Oil Field in the North Sea. The factory has been closed for maintenance over the last few months, but is expected to restart production on Monday. Once open, officials expect the oil field to increase production over the next two weeks, until it has reached its previous output level before the maintenance started.
In a market where oil demand is declining among struggling economies, this new surplus is likely to drive prices down. Between Europe's financial crisis and slow recoveries in both China and the U.S., most analysts believe that the market's demand will not be able to absorb the influx of new supply.
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