Crude oil futures ended little changed Friday, pausing after broad swings to brace for Hurricane Irene and to puzzle out the near-term outlook for U.S. economy.
Prices whipsawed along with the dollar and equities after Federal Reserve Chairman Ben Bernanke didn't signal immediate plans to shock the nation's economy with another round of stimulus programs. After ducking $83 a barrel, crude futures returned to the familiar harbor of $85 a barrel to ride out the hurricane and the stormy economic uncertainty.
"The market can't pull too far away from $85 a barrel," said Gene McGillian, broker and analyst at Tradition Energy, referring to the level that has been a market anchor since prices dropped below $80 a barrel a week earlier on what now is believed to be overly optimistic hopes for a quick resolution to the Libyan civil war and a sharp rebound in that nation's oil production.
Light, sweet crude oil for October delivery settled 7 cents higher at $85.37 a barrel.
Gasoline futures prices, after a 3.1% rise on Thursday on worries over Irene's potential damage to oil facilities in the Northeast U.S. this weekend, fell 1.1% on the day, though heating oil gained, largely on expected continued strong export demand.
Hurricane Irene weakened a little Friday afternoon as it continued to churn toward the North Carolina coast, the National Hurricane Center said in its 2 p.m. EDT advisory. The hurricane, located at about 300 miles south-southwest of Cape Hatteras, N.C., then was packing sustained winds of 100 miles an hour, down from 105 mph earlier. Irene remained a Category 2 storm, and its strength isn't expected to change much before the core of the storm reaches the North Carolina coast Friday night. Forecasters said it is likely to be a Category 1 hurricane by the time it arrives in the New Jersey-New York area on Sunday.
Traders said the frenzied buying in gasoline futures Thursday was spurred by position adjustments ahead expiration on Wednesday of the September contract as Irene loomed. On Friday, some analysts talked of more modest potential for short-term delays to oil shipments, rather than potential for severe disruption of regional infrastructure.
Gasoline demand, not supply, may prove to be the casualty of Hurricane Irene, which promises a wash-out late summer weekend for 20% of Americans as it makes its way up the East Coast, analysts at J.P. Morgan said in a report. "We assign a low probability of a major refining interruption lasting more than a week, and shipping problems will likely unwind in the course of a few days," the bank said.
Demand for gasoline, the most widely used petroleum product in the world's biggest oil consumer, has been hit by the weak economy, high unemployment and gasoline prices that remain about one-third higher than year-ago levels. Demand on the East Coast been especially hard hit. MasterCard's SpendingPulse unit said East Coast demand in the week ended Aug. 19 was 4.2% to 4.9% below a year ago.
Overall U.S. oil "demand doesn't remain very healthy," said Kyle Cooper, managing partner at IAF Energy Advisors in Houston. "To see us at around 19 million barrels a day is pretty poor for this time of year."
Cooper said that while the overall U.S. economy "is not great, but not horrible either, the energy economy is clearly in recession." He said he expects a peaceful aftermath to Irene would knock crude prices down to the mid-$70 a barrel last seen in September.
September reformulated gasoline blendstock futures settled 1.1%, or 3.33 cents, lower at $2.9346 a gallon.
Heating oil for September delivery rose for a sixth day, gaining 2.46 cents, to $3.0101 a gallon, the most since Aug. 3. Heating oil has gained 4.7%, or 13.53 cents in the six-day rally.