08/28/2012 08:36 EDT | Updated 10/28/2012 05:12 EDT

Oil above US$96 as refiners suspend activities due to tropical Storm Isaac

The price of oil rose to above US$96 a barrel Tuesday as weather forecasters said tropical storm Isaac, which was causing oil production cuts in the Gulf of Mexico, could soon gain intensity and turn into a hurricane.

By early afternoon in Europe, benchmark West Texas Intermediate crude for October delivery was up 61 cents at US$96.08 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the contract fell 68 cents to close at US$95.47.

In London, Brent crude rose 34 cents to US$112.60 a barrel on the ICE Futures exchange.

So far, Isaac has led to refineries with the combined capacity to refine one million barrels of oil a day to begin suspending operations. The U.S. consumes about 19 million barrels of oil products a day.

Although the storm isn't expected to damage refineries, refinery owners often shut down operations in advance of a storm. If refineries lose power suddenly, it can take several days to restart them. However, it they conduct what is known as an orderly shutdown, operations can be restarted as soon as the source of power is assured.

Oil analyst Stephen Schork said in an email commentary that traders are focusing on a Venezuelan refinery fire, Isaac and U.S. consumer confidence, which he said was expected to rise for the month of August.

Rising confidence is a sign that consumers might be ready to spend, which could lead to an increase in fuel consumption and move prices higher.

Another factor pushing up prices was an intense fire at the Amuay refinery in western Venezuela. The fire has been burning since a huge explosion at the refinery on Saturday caused a suspension of operations there.

Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products.

Data for the week ending Aug. 24 is expected to show draws of two million barrels in crude oil stocks and two million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.

In other Nymex energy trading, gasoline was down 1.89 cents at US$2.9311 a U.S. gallon (3.79 litres), while natural gas lost 4.2 cents to US$2.611 per 1,000 cubic feet. Heating oil added 1.79 cents to US$3.1374 a gallon.