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.
U.S. President Barack Obama warned Gulf Coast residents that there could be significant flooding from Isaac, 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.
"Seemed to be some misplaced expectations of a release announcement and prices bounced back some after he didn't mention the reserves," said John Kilduff, partner at Again Capital LLC in New York.
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.
Gulf Coast refiners shut about 1.32 million barrels per day of capacity, pressuring crude futures on Monday on expectations that less crude oil will be needed by refineries and that Isaac, a weaker storm than the 2005 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 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 Louisiana refineries than expected fully shut down ahead of Isaac's landfall, traders said.
IEA CHIEF: RESERVES RELEASE UNNECESSARY
The head of the International Energy Agency on Tuesday reiterated her opposition to a reserves release.
Maria van der Hoeven, the Dutch executive director of the agency, 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.
On Friday, crude futures felt pressure when a source and an oil trade journal indicated that the IEA had dropped its resistance to a U.S.-led plan for a release.
U.S. OIL INVENTORIES
U.S. crude oil and refined products stockpiles were expected to be lower, a Reuters survey of analysts taken ahead of weekly inventory reports from industry and government showed.
The report from industry group the American Petroleum Institute is due at 4:30 p.m. EDT (2030 GMT) on Tuesday. With the government's data released by the Energy Information Administration on Wednesday at 10:30 a.m. EDT (1 430 GMT).
With the threat from Hurricane Isaac in the spotlight on Tuesday, investors also awaited a gathering of central bank officials in Jackson Hole, Wyoming, and Friday's speech by U.S. Federal Reserve Chairman Ben Bernanke, hoping for indications about more monetary stimulus.
The Fed meeting will be followed by the European Central Bank's policy meeting on Sept. 6 and the German Constitutional Court's ruling on the euro zone's permanent bailout fund on Sept. 12, which clarify the ECB's bond-buying plans.
Additional stimulus from the Fed is expected to pressure the dollar, increasing demand for dollar-denominated commodities like oil and causing prices to rise. (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)