Oil Market Watches Washington, Tropical Storm

By KONSTANTIN ROZHNOV

LONDON—Oil futures were mixed as investors followed developments in the Gulf of Mexico, where the watch area for tropical storm Don was extended, and Washington, D.C., where lawmakers are still at loggerheads over an agreement to raise the debt ceiling.

In mid morning, the front-month September Brent contract on London's ICE futures exchange was 30 cents, or 0.3%, higher at $117.73 a barrel. The front-month September contract on the New York Mercantile Exchange was trading down 29 cents at $97.11 per barrel.

Worries that tropical storm Don, which has already prompted the evacuation of nonessential personnel from several oil and gas platforms, could affect oil production are supporting prices, said Andy Sommer, senior oil analyst at EGL.

The storm's current path also seems to be a concern for oil-refining assets, said Olivier Jakob, managing director of consultancy Petromatrix.

Despite the concerns over the storm, many market participants are on the sidelines as U.S. politicians have yet to reach an agreement to raise the country's borrowing limit ahead of the Aug. 2 deadline, analysts said.

"Investors are starting to take some risk off the table as the deadline on the U.S. debt extension comes closer," Mr. Jakob said.

Meanwhile, the price difference between the Brent and West Texas Intermediate crude contracts widened after the U.S. Energy Information Administration Wednesday reported an unexpected increase in the country's oil stocks, pushing U.S. crude lower relative to Brent.

In mid morning, Brent was trading at a premium of $20.65 a barrel to WTI.

"Unless something truly untoward were to take place regarding one of the pipelines bringing crude oil down from Canada or unless suddenly one of the other pipelines in the Midwest were suddenly to be reversed allowing crude to move from Cushing to the Gulf, this spread is going to widen further and perhaps dramatically," Dennis Gartman wrote in his daily Gartman Letter report.

The current situation is such that "if one is a buyer of crude futures one buys Brent; if one is a seller, one sells WTI," Mr. Gartman added.

The ICE gasoil contract for August delivery was down $2.25, or 0.2% at $972.25 per metric ton, while Nymex gasoline for August delivery was 135 points, or 0.4% higher at $3.1558 per gallon.

Write to Konstantin Rozhnov at konstanin.rozhnov @dowjones.com

via online.wsj.com