Oil holds at $109 on demand concerns, storm threats

Oil holds at $109 on demand concerns, storm threats
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First Published: Thu, Sep 04 2008. 09 40 AM IST
Updated: Thu, Sep 04 2008. 09 40 AM IST
Singapore: Oil prices were little changed near $109 a barrel on Thursday as traders weighed concerns over slowing demand from major consumer countries against further hurricane threats to the U.S. oil sector.
Prices have tumbled by more than $6 since Friday after Hurricane Gustav, which swept through the major oil-producing Gulf of Mexico and made landfall near New Orleans on Monday, turned out to be less destructive than feared.
U.S. crude slipped 18 cents to $109.17 a barrel by 0225 GMT while London Brent crude slipped 16 cents to $107.90, a sixth consecutive day of losses.
Signs of slowing oil demand in the United States and other consumer nations have helped drag oil prices well below their peak near $150 hit in July, but many traders remain anxious that new storms may not spare oil facilities.
“There are still concerns over supply issues. A lot of the Gulf of Mexico capacity was shut down and some refineries are still closed. We don’t know how long they’ll remain offline,” said Gerard Rigby, an analyst at Fuel First Consulting in Sydney.
Companies closed 14 refineries and shut in all of the 1.3 million barrels per day of oil production in the Gulf at the peak of Gustav’s impact on Monday. By Wednesday, some refineries and offshore production were coming back online, but other facilities remained paralysed by a lack of reliable power.
Forecasters expect a total of 14 to 18 tropical storms during this year’s season, which runs through November, above the historical average of 10.
“We’re still in the hurricane season after all. Gustav sort of disappeared, but there are more hurricanes to come,” said Rigby.
On Thursday, Hurricane Ike strengthened into an “extremely dangerous” Category 4 hurricane in the Atlantic, although it is too early to tell which land areas it will hit, the U.S. National Hurricane Center said.
Tropical Storm Hanna intensified to a slighter degree as it swirled over the Bahamas toward the southeast U.S. Coast.
Recent gains in the U.S. dollar also weighed on prices. The dollar dipped against the euro on Thursday after having hit an eight-month high a day ago, as investors trimmed positions ahead of interest rate decisions by the European Central Bank and Bank of England, which are expected to leave rates unchanged.
A rush of cash from investors buying commodities as a hedge against inflation and the weak U.S. dollar had helped send oil up sevenfold at its peak in a six-year rally, underpinned by surging oil demand in emerging economies such as China and India.
But the volatile commodities market has hurt some investors as the dollar’s recovery drives commodities sharply lower.
Ospraie Management LLC said on Tuesday it would close a flagship fund, a move which traders said could have added to losses on commodity markets this week, although they did not expect the impact to continue.
Any disruption caused by Gustav will not be fully reflected in data until next week. The set of data is due a day later than usual because of a public holiday in the United States on Monday.
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First Published: Thu, Sep 04 2008. 09 40 AM IST