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Bloomberg: Crude Oil Falls on Signs Storm May Miss Gulf Production Areas

By Tom Cahill and Gavin Evans

Aug. 28 (Bloomberg) — Crude oil snapped a two-day advance on signs a Caribbean tropical storm won’t pack the same punch as Hurricane Katrina, which ripped into Gulf of Mexico platforms and refineries a year ago today.

Tropical storm Ernesto weakened as it swept over Haiti yesterday, the National Hurricane Center in Miami said yesterday in an advisory at 11 p.m. New York time. Ernesto is expected to regain strength and speed as it moves toward Cuba and Florida, where hurricane warnings are in effect. The storm carried winds of about 50 miles per hour, just over a third of Katrina’s 140 miles per hour winds.

“Prices have fallen because the storm is not a huge one,” said Thomas Jaboeuf, chief oil economist at Gaselys in Paris. “It’s been downgraded to a tropical storm, perhaps it could strengthen again, but it’s not worrying now.”

Crude oil for October delivery fell 89 cents, or 1.23 percent, to $71.62 a barrel in electronic trading on the New York Mercantile Exchange at 9:36 a.m. in Paris.

Oil reached $73.75 a barrel on Aug. 25, the highest intraday price in more than a week, on concern Ernesto would disrupt output at the Gulf of Mexico, source of a quarter of U.S. oil production. ConocoPhillips, BP Plc and Royal Dutch Shell Plc evacuated non-essential personnel from sites at the Gulf over the weekend.

In London, Brent crude oil for October settlement fell 77 cents, or 1 percent, to $71.93 as of 8:39 a.m. London time.

No Katrina

Ernesto slowed as it hit Haiti, dumping as much as 20 inches of rain, the National Weather Service said in its advisory. The storm was headed northwest towards Cuba at about 7 miles per hour and could “regain strength as it moves away from the mountainous terrain of Haiti,” the advisory said.

“It’s no longer on a path that will take it into the Gulf of Mexico oil and gas infrastructure,” Tobin Gorey, a commodity analyst at Commonwealth Bank of Australia Ltd., said in Sydney. “A few people either didn’t see those forecasts changing or weren’t able to get their chips off the table on Friday.”

On its current track, the storm would make landfall on the south eastern coast of Florida on Wed. at 8 p.m. The storm has a 50 percent chance of becoming a Category 1 level storm, with winds from 74 to 95 miles per hour, in the next 12 hours, the service estimated. There’s only a 2 percent chance that the storm would reach a Category 2 level storm, with winds of 96 to 100 miles per hour, the National Weather Service estimated.

Katrina hammered into New Orleans as a Category 4 storm on Aug. 29, 2005. The damage from that storm and Hurricane Rita is still being repaired.

Oil production still closed because of Katrina and Hurricane Rita was 179,970 barrels a day, or 12 percent of the region’s total, as of June 21, the U.S. Minerals Management Service said. Natural gas production still shut totaled about 936 million cubic feet a day, or 9.4 percent of the Gulf total.

Gulf oil producers normally pump about 1.5 million barrels a day, or 10 percent of U.S. refinery demand, according to government data. Daily offshore gas production normally totals about 10 billion cubic feet, or 17 percent of average daily consumption.

It’s too early in the storm season for traders and investors to stop worrying about storms, said Jaboeuf.

“It’s been quite quiet so far but things are starting to become active in the Atlantic,” he said.

Iranian Nuclear

Prices also fell after Russian Defense Minister Sergei Ivanov opposed any sanctions by the United Nations against Iran for its nuclear program, Interfax reported on Aug. 25.

It was “premature” to talk about sanctions, Interfax said, citing Ivanov.

The UN Security Council has told Iran, the world’s fourth- largest oil producer, to stop uranium enrichment by Aug. 31 or face economic sanctions.

The nation, which yesterday test-fired a long-range sea-to- air missile, remains willing to hold ministerial talks with Western powers about its nuclear ambitions, Agence France-Presse reported, citing Iran’s lead nuclear negotiator Ali Larijani.

“Production of nuclear fuel is one of Iran’s strategic objectives,” Larijani told the state radio yesterday. “Any action to limit or deprive Iran could not force Iran to give up this goal.”

UN Secretary General Kofi Annan will visit Iran on Sept. 2, Foreign Ministry spokesman Hamid Reza Asefi said yesterday.

The U.S. gasoline pump price fell 15.5 cents in the past two weeks from a record average of $3.025 a gallon, as inventories of the fuel increased, Trilby Lundberg said, citing her survey of about 7,000 filling stations nationwide.

The nationwide average for self-service regular was about $2.87 a gallon, the survey showed, according to Lundberg, an analyst based in Camarillo, California.

Gasoline for September delivery in New York fell 4.01 cents to $1.855 a gallon at 9:47 a.m. Paris time in electronic trading.

To contact the reporter on this story: Tom Cahill in Paris [email protected] Gavin Evans in Wellington at [email protected] .

Last Updated: August 28, 2006 04:16 EDT and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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