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Oil rises near $117 on supply concerns

Oil rises near $117 on supply concerns
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First Published: Wed, Aug 27 2008. 10 44 AM IST
Tokyo: Oil rose for a third straight session to near $117 a barrel on growing worries over Tropical Storm Gustav, which headed towards US oil and natural gas installations in the Gulf of Mexico.
Crude for October delivery rose 44 cents to $116.71 a barrel, after settling up $1.16 on Tuesday. London Brent crude rose 42 cents at $115.05 a barrel.
Oil touched a high of $122.04 last Thursday, as bad weather threatens the Gulf of Mexico and helped stem oil’s slide from a record above $147 a barrel hit in mid-July.
Hurricane Gustav was downgraded to a tropical storm on Wednesday after it slammed into Haiti on Tuesday, killing at least two people.
Forecasters expect wind speeds to pick up again to hurricane force and Gustav could become the first major storm to threaten US oil and gas production in the Gulf of Mexico since 2005.
Computer models showed Gustav could track towards Louisiana and Texas, where rigs produce a quarter of US crude oil and 15% of its natural gas.
“I’m afraid that Gustav could potentially cause an impact similar to hurricanes Katrina and Rita, although I certainly do not wish such things,” said Tetsu Emori, a fund manager at Astmax Co in Tokyo.
Three years ago, Hurricanes Katrina and Rita slammed into the region, crippling production and flooding New Orleans.
Royal Dutch Shell, the largest oil and natural gas producer in the region, said it would begin evacuating non-essential personnel from offshore facilities on Wednesday if the storm’s forecast remains unchanged.
Tensions between the West and Russia over Georgia and threats by Russian President Dmitry Medvedev of a military response to the deployment of a US missile shield in Poland also supported prices.
Demand slows
US oil demand in June fell 5.6% from a year ago, the US Energy Information Administration reported on Tuesday, hurt by high fuel prices and the wider economic crisis.
But US retail gasoline demand rose 1.3% last week as average gasoline prices dipped below $4 nationwide, MasterCard Advisors said on Tuesday.
Traders also focused on the latest oil inventory data in top consumer the United States.
According to a poll, analysts showed an average forecast for a 1 million-barrel rise in US crude stocks and a 500,000 barrel build in distillates.
Gasoline inventories are projected to fall 2.9 million barrels, a fifth straight weekly decline, as refiners were seen drawing down inventories of summer-grade gasoline.
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First Published: Wed, Aug 27 2008. 10 44 AM IST