Oil steady; Mexico resumes output, subprime weighs

Oil steady; Mexico resumes output, subprime weighs
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First Published: Fri, Aug 24 2007. 11 04 AM IST
Updated: Fri, Aug 24 2007. 11 04 AM IST
Singapore, 24 Aug, Oil prices steadied at below $70 a barrel today after Mexico’s state oil firm said Gulf oil rigs suffered only minor damage from powerful Hurricane Dean and worries over the subprime mortgage woes in the US weighed.
US light crude for October delivery dipped 5 cents at $69.78 a barrel, after gaining 57 cents on 23 August, ending a three-day losing streak that had knocked prices to their lowest since late June.
Mexico’s Gulf oil rigs restarted production in the Bay of Campeche after being hit by the storm, with 18,000 Gulf workers expected back at work on Friday, said Pemex, one of the top three oil suppliers to the US.
It produced 342,000 barrels of crude oil in the region on 23 August after shutting in some 2.65 million bpd of production as the storm approached earlier this week.
While dealers remained worried about the impact of delayed Mexican oil supplies on US crude oil inventories, the spectre of further woes in the US subprime sector and fears that the crisis could hit economic growth capped the upside.
“There are always concerns about US oil stocks and potential future storms. But concerns over the US housing market is putting the brakes on price gains,” said Gerard Rigby from Fuel First Consulting in Sydney.
US oil briefly leapt over $70 earlier on 23 August, but gains were clipped after the head of the biggest US mortgage lender, Countrywide Financial Corp., said the home loan market was not improving, undermining the market’s fragile confidence.
The US subprime loan crisis has spread to other markets in recent weeks and oil has been hit as investors, fearing a credit squeeze, have sold to raise cash.
US stocks fell after the remarks. The Dow Jones industrial average turned negative while the Standard & Poor’s 500 Index extended losses. Asian stocks fell on 24 August as the fear of a recession in the world’s top economy loomed.
Barclays Capital analysts said they believed the fallout from US subprime loans should have little impact on energy, however, beyond prompting some speculators to unwind long positions.
The oil market also continued to draw support from data on Wednesday 22 August that showed a surprise decline in US gasoline stockpiles last week of 5.7 million barrels.
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First Published: Fri, Aug 24 2007. 11 04 AM IST