Oil prices jumped on Tuesday as the U.S. east coast braced for a major hurricane.
Hurricane Florence maintained Category 4 strength as it approached North Carolina and South Carolina. The storm is expected to make landfall later this week. It could also be the worst storm to hit North Carolina in 60 years.
"This is people buying ahead of the storm, even though it is misplaced," said John Kilduff, founding partner at Again Capital. "Gasoline is leading the way. It's the demand surge we're seeing as people try to get out of the way of the storm. … At times like this people will buy to make sure they're covered."
RBOB gasoline futures for October delivery jumped 2.2 percent to $2.0007 per barrel.
"There were worries about whether it would affect the Colonial Pipeline which is a big product pipeline to the northeast," said Gene McGillian, vice president of research at Tradition Energy. He said gasoline did lead the market higher and there could be concern about Florence, but in reality the hurricane should create demand destruction.
Crude also got a boost as U.S. sanctions squeezed Iranian crude exports, tightening global supply despite efforts by Washington to get other producers to increase output.
"The impact of the U.S. sanctions on Iran is firmly being felt," said Tamas Varga, analyst at London brokerage PVM Oil. "The biggest worry is obviously the amount of Iranian oil that is disappearing from the market."
Washington has told its allies to reduce imports of Iranian oil and several Asian buyers, including South Korea, Japan and India appear to be falling in line.
But the U.S. government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.