SINGAPORE: Crude prices rose after a cautious start on Tuesday, boosted by warnings that a tropical storm was about to hit the coast of oil producing state Texas. The US National Hurricane Center (NHC) issued a tropical storm warning on Tuesday morning at 0200 GMT for the Texas coast from Baffin Bay to High Island.
"On the forecast track the centre ... is expected to make landfall in the warning area along the Texas coast Tuesday morning and move inland over south-central Texas Tuesday afternoon and Tuesday night," the NHC said, adding that strong winds, rain and some flooding were expected.
US crude futures were up 63 cents at $60.15 a barrel at 0538, keeping the contract within a trend channel of $57-$62 per barrel that has been in place since the beginning of May. Brent rose 29 cents to $64.24 per barrel.
More than 45 percent of US refining capacity is located along the US Gulf Coast, which is also home to about half of total US natural gas processing capability.
The stronger US prices meant that Brent's premium over American crude has fallen almost 60 percent this year to around $3.70 per barrel.
Analysts said the upside potential for oil prices was limited due to ongoing oversupply.
The US Energy Information Administration estimates global petroleum oversupply at 2.6 million barrels per day at the end of the second quarter of this year, compared with just 1.05 million barrels per day in June 2014.
"Most shale oil production in America is $80 or less for breakeven, and if drilling costs are done by 20 percent, they are profitable at $65," said Takayuki Nogami, senior economist at Japan Oil, Gas and Metals National Corp.
"After July, an Iran deal is likely to be compiled so the market has no room for much upside, and WTI could go below $50," he said, adding that he expected WTI to trade at $45-$65 through the winter heating season, with Brent at a premium of around $5.
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