Oil rose to near $89 per barrel Tuesday on expectations that supplies will be tighter in the wake of Hurricane Irene.
The storm forced several refineries and petroleum terminals to reduce production or shut down altogether. The East Coast may deal with lower fuel supplies in coming weeks, and traders are betting oil and gasoline prices will rise. Meanwhile, another tropical storm _ Katia _ is strengthening to a hurricane out in the Atlantic and may eventually head toward the U.S.
Nobody wants to sell "when a month from now people will be talking about another monster hurricane," said Michael Lynch, president of Strategic Energy & Economic Research.
Benchmark West Texas Intermediate crude rose $1.63 to finish at $88.90 per barrel in New York. Brent crude jumped $2.14 to end at $114.02 per barrel in London.
"There is clearly a worry about the contribution of some key northeastern refineries," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
OPIS said that Sunoco's refineries in Marcus Hook and Philadelphia have slowed fuel production. ConocoPhillips refinery in Trainer, Pa., cut back on production as well, while its Linden, N.J., facility was shut down. Hess Corp.'s Port Reading, N.J., refinery also cut production.
Analysts note that U.S. energy demand likely will decline after Hurricane Irene as massive flooding keeps many people off roads along the East Coast and in the Northeast, and millions of others remain without power.
Also on Tuesday a private firm said consumer confidence in August was at its lowest level since April 2009. That could point to lower fuel demand as well. Analysts say, however, that it may not affect prices until refineries are back to full production.
Gasoline pump prices appeared to hold steady in states hit by Irene; including North Carolina, Virginia, Pennsylvania, New Jersey, Connecticut and Vermont. The national average was unchanged Tuesday at $3.612 per gallon. A gallon of regular has come down 37 cents from its 2011 peak near $4 per gallon in May, but it's still 93 cents higher than at the same time last year.
In other Nymex trading, heating oil rose 5.94 cents to finish at $3.0767 per gallon and gasoline futures increased by 7.2 cents to end $2.8415 per gallon. Natural gas picked up 7.9 cents to finish at $3.909 per 1,000 cubic feet.