Business | Oil & Gas
Oil rallies to $117 on hurricane fears
Oil rose nearly $2 to around $117 a barrel on Tuesday, as concerns grew about possible disruption to US offshore oil and gas output from a strengthening Hurricane Gustav.
- Reuters
- Published: 21:39 August 26, 2008
London: Oil rose nearly $2 to around $117 a barrel on Tuesday, as concerns grew about possible disruption to US offshore oil and gas output from a strengthening Hurricane Gustav.
The US National Hurricane Centre said Gustav, a category one hurricane, had strengthened slightly in the central Caribbean as it churned toward southwestern Haiti.
Weather models showed it either heading in a westerly direction toward Mexico's Yucatan Peninsula or steering northwest and moving into the central Gulf of Mexico by early Sunday, to potentially disrupt offshore oil and gas production.
US crude, which fell more than $2 earlier in the session, was $1.86 higher at $116.97 by 1444 GMT. London Brent crude rose $1.59 to $115.62.
Eric Wilhelm, a senior meteorologist at Accu-Weather, said Hurricane Gustav may threaten production areas off the coasts of Louisiana and Texas by the middle of next week by which time the storm may have gained in intensity to be a major hurricane. "All of the oil platforms off Texas and Louisiana will probably be at risk, but that's real long-range," Wilhelm told Reuters, adding that Gustav was expected to enter the Gulf of Mexico by Monday possibly as a category 3 hurricane.
Earlier, oil fell as the dollar hit a six-month high against the euro yesterday after weak German data highlighted a flagging euro zone economy. Dollar strength can limit the appeal of oil and commodities as an inflation hedge.
"Short term trading on oil should now be dominated this week by tracking Gustav," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.
Germany said its gross domestic product (GDP) contracted by 0.5 percentage points on the quarter in the April-June period, the first contraction since 2004 and raising concerns Europe's biggest economy could be headed for a recession.
Oil has fallen sharply from a record high of $147.27 reached on July 11 in part due to evidence of a global slowdown in energy demand.
Currency: Dollar surges
The dollar has hit a six-month high against the euro and surged to a 25-month high against the pound, as two US economic reports were better than expected, while business and consumer sentiment plunged in Germany.
The 15-nation currency fell as low as $1.4569 - its lowest level since February 14 - before recovering to $1.4647 in New York trading. The British pound fell to its lowest point since July 2006 at $1.8329 before recovering to $1.8389 in New York trading.
- Reuters
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