Business | Oil & Gas
Oil rebounds as Hurricane Ike sweeps through Gulf of Mexico
Oil prices bounced back above $102 a barrel on Friday as Hurricane Ike swept through the Gulf of Mexico, prompting companies along the Texas coast to shut down refining and drilling operations.
- AP
- Published: 22:59 September 12, 2008
New York: Oil prices bounced back above $102 a barrel on Friday as Hurricane Ike swept through the Gulf of Mexico, prompting companies along the Texas coast to shut down refining and drilling operations.
Ike is forecast to land early today as a Category 3 hurricane near Galveston, a barrier island about 80 kilometres southeast of Houston.
The Houston region is home to about one-fifth of US refining capacity, and the site of a major fuel and grain distribution channel.
Light, sweet crude for October delivery rose $1.43 to $102.30 a barrel in morning trading on the New York Mercantile Exchange (Nymex).
The contract fell $1.71 overnight to settle at $100.87 after dropping as low as $100.10 per barrel. The last time Nymex crude traded below the $100 mark was April 2.
In London, October Brent crude rose 94 cents to $98.58 a barrel on the ICE Futures exchange, after closing at a six-month low in the previous trading session.
Gasoline prices also rose. October gasoline futures climbed 8.97 cents to $2.8385 a gallon on Nymex.
ExxonMobil Corp., Val-ero Energy Corp., Conoco-Phillips and Marathon Oil Co. have begun halting operations as the hurricane headed straight for the nation's biggest complex of refineries and petrochemical plants.
US wholesale gasoline prices spiked 30 per cent Thursday. As of Thursday, about 97 per cent of crude production and 93 per cent of natural gas production in the Gulf of Mexico were shuttered, according to the Department of the Interior's Minerals Management Service.
Ike and the previous Hurricane Gustav have helped to stanch a sharp downturn in oil prices.
Concerns over slowing economic growth on a global scale and a strengthening US dollar have led funds to liquidate their commodities holdings, pushing crude prices down about 30 per cent from their record $147.27 set on July 11.
"Oil demand on a global basis is quite pessimistic," said Tetsu Emori, a commodity markets fund manager with ASTMAZ Futures Co. in Tokyo.
"If it wasn't hurricane season, crude would be under $100 already."
And storms can dampen demand even more, by disrupting the local economy, power plants, and electrical distribution systems.
Amid a much slower US economy that caused June fuel demand to fall more than 5 per cent from the same period a year ago, many market watchers are expecting oil prices to resume their tumble.
"With demand being down as much as it is, the market, some argue, is a bit oversupplied," said Stephen Maloney, a senior consultant in energy risk management at Towers Perrin.
"When you ask, how does Ike affect things? Its impacts are going to be in the context of lower demand for products than a year ago."
In other Nymex trading, October heating oil futures rose 4.25 cents to $2.9580 a gallon. Natural gas for October delivery rose 28.5 cents to $7.533 per 1,000 cubic feet.
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