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Energy prices jump even as Gulf storm weakens

OIL prices shot above US$80 a barrel yesterday as a weakened U.S. dollar created more turbulence in energy markets than a tropical storm heading into the Gulf of Mexico.

Ida had helped push crude prices higher all morning, but just as the then-hurricane was demoted to a tropical storm, the euro pushed passed the US$1.50 level for the first time this month and sent oil even higher.

Benchmark crude for December delivery on yesterday rose US$2 to settle at US$79.43 a barrel on the New York Mercantile Exchange. A barrel passed US$80 by early afternoon before easing back.

Investors holding euros or other strong currencies can buy more dollar-based crude when the U.S. currency falls, and that has sent prices higher throughout the year.

Demand for crude is still weak, but investment in crude futures has still paid off this year. A barrel of oil cost US$32 in December.

Uncertainty about the Ida's path and its punch supported prices, at least until midmorning when wind speeds had dropped by 20 mph (32 kph). Forecasters said the storm would continue to weaken and that it would likely head east of most drilling platforms and refineries.

Weather Insight LP is expecting 700,000 barrels per day of crude oil production to be shut in, and 3 billion cubic feet per day of natural gas production to be taken off line until about Wednesday.

Given the huge surplus in oil, natural gas and gasoline in storage, the reaction to Ida on the New York Mercantile Exchange where energy futures are traded appeared to be muted.

Since hurricanes Gustav and Ike raked the gulf last year, there have been no major threats to the energy complex and demand for crude has left the country well supplied.

Crude supplies are 7.62 percent higher than a year ago and gasoline in storage is up 7 percent, according to energy consultancy Cameron Hanover.

In other Nymex trading, heating oil rose 5.9 cents to settle at US$2.0627 a gallon. Gasoline for December delivery gained 5.75 cents to settle at US$1.9818 a gallon. Natural gas for December delivery rose 7.5 cents to US$4.67 per 1,000 cubic feet.

In London, Brent crude for December delivery rose US$1.90 to settle at US$77.77 on the ICE Futures exchange.



 

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