The biggest re­finer­ies in the North­east shut down or throt­tled back on Mon­day in ad­vance of Hur­ri­cane Sandy, and oil prices fell sharply as it ap­peared the mas­sive storm will re­duce de­mand. Phillips 66 shut down its Lin­den, New Jer­sey re­fin­ery, the sec­ond-biggest in the North­east at 285,000 bar­rels per day. The biggest re­fin­ery in the area, Philadel­phia En­er­gy So­lu­tions, was near­ly shut. Most oth­er big re­finer­ies in the North­east were run­ning at re­duced ca­pac­i­ty.

Sandy is pow­er­ful enough to down trees and pow­er­lines and cause wide­spread flood­ing. Busi­ness­es could al­so be shut for days. If so, de­mand for gaso­line and oth­er oil prod­ucts would drop sharply.

The pow­er out­ages and the shut­down of ma­jor cities "may take a toll on de­mand un­like any­thing we have seen be­fore," wrote Phil Fly­nn, a se­nior mar­ket an­a­lyst for Price Fu­tures Group, in a re­port on Mon­day. "The im­pact on de­mand may not last for hours but more than like­ly for days," he wrote.

Tom Kloza, chief oil an­a­lyst at Oil Price In­for­ma­tion Ser­vices, said he ex­pects the drop in de­mand for oil and re­fined prod­ucts "will be about as sig­nif­i­cant as we've seen since Ka­t­ri­na made land­fall" in 2005. Crude oil prices fell US$1, or 1.1 per cent, to US$85.32 a bar­rel in trad­ing on the Nymex.