By Annika Breidthardt / Reuters
Singapore: Oil prices gained more than $1 on Thursday after falling to another five-month low the previous day, drawing support from Hurricane Ike and Opec’s surprise output cut while wary traders watched the US dollar.
The dollar briefly touched a new one-year high against the euro on Thursday but weakened versus the yen, lending a touch of support to a commodities complex that has been battered by the unwinding of the short-dollar/long-commodities trade.
US light crude for October delivery rallied $1.03 to $103.61 a barrel by 0205 GMT, having dropped as low as $101.36 a day earlier after the pressure of a rising dollar and concerns about global demand outweighed earlier bullish news that Opec had agreed to cut output by about 500,000 bpd.
London Brent crude rose $1.23 to $100.02 a barrel at 0142 GMT.
“While OPEC has certainly drawn a line in the sand around the $100 level, it remains to be seen if the cartel can actually achieve the cuts outlined in the announcement,” said Jonathan Kornafel, Asia director at US-based options trader Hudson Capital Energy.
Oil prices have tumbled 30% since hitting a record high above $147 a barrel three months ago, a descent barely slowed by a pair of hurricanes whipping through the US Gulf, home to a quarter of US oil production.
Oil companies kept shut almost all US offshore production for a second week and began shutting coastal refineries in Texas as Hurricane Ike headed toward the key US energy hub.
Oil output from the region was less than 5% of normal as Ike approached just over a week after Hurricane Gustav spun through the same area.
Combined, Gustav and Ike have reduced Gulf production by 14.1 million barrels of oil, 67.9 billion cubic feet of natural gas, cutting into both fuel and crude oil inventories.
US refinery utilisation plunged to 78.3% of total capacity in the week ending 5 September, the lowest level since October 2005 when hurricanes Katrina and Rita ravaged Gulf coast refineries, data showed on Wednesday.
Prices also fell on Wednesday after the International Energy Agency cut its world oil demand forecasts for this year and the next as high prices and mounting economic troubles drive consumers and businesses to conserve.
US oil demand is already running about 3.8% below last year, according to government data.