10/29/2012 09:42 EDT | Updated 12/29/2012 05:12 EST

Oil falls below US$86 a barrel as huge storm bears down on U.S. East Coast

The price of oil fell below US$86 a barrel Monday as a gargantuan storm headed for the heavily populated U.S. East Coast, where energy consumption was likely to drop as many businesses closed and transportation ground to a halt.

By early afternoon in Europe, benchmark oil for December delivery was down 40 cents at US$85.88 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 23 cents to end at US$86.28 per barrel in New York on Friday.

Forecasters say the massive storm system could blow ashore Monday across a wide swath of the eastern seaboard, bringing with it the potential for massive flooding and widespread power outages.

"We're going to get some bad weather somewhere in the U.S. because of hurricane Sandy and that's not good for demand," Carl Larry of Oil Outlooks and Opinions said in an email commentary.

New York City, the biggest city in the United States, is in the direct path of the storm and expected to bear its brunt.

Air, land and rail transportation was halted and hundreds of thousands of people have been ordered to evacuate. Some 7,500 flights scheduled for Monday and Tuesday have been cancelled at New York City airports.

The New York Stock Exchange and the New York Mercantile Exchange are shutting their trading floors in New York on Monday. Trading will go on electronically but will close early.

While more than half a dozen refineries could be in the path of the storm, the U.S. is well-supplied with oil, while demand for gasoline remains weak.

In London, Brent crude, which is used to price international varieties of oil, was down 29 cents a barrel at US$109.27. Stock markets in Europe and Asia were lower Monday on disappointing company results, also weighing on oil prices.

In other energy futures trading in New York, wholesale gasoline rose 2.36 cents to US$2.6653 a U.S. gallon (3.79 litres), natural gas added 0.1 cent to US$3.401 per 1,000 cubic feet and heating oil rose 1.52 cents to US$3.0916 a gallon.