NYMEX crude oil falls to $110.63 as Hurricane Gustav weakens

Oil prices dived to 4-month lows on Monday [1 Sep 2008], with Brent North Sea crude for Oct 2008 delivery plunging to $109.20 in London as a weakening Hurricane Gustav reduced the threat of damage to energy facilities in the Gulf of Mexico. In New York, NYMEX light sweet crude oil prices touched a low of $110.63. More than 96% of Gulf oil production and 82% of natural gas output had been stopped because of Hurricane Gustav, but it was not expected to be as bad as Hurricane Katrina in 2005.

Falling demand for crude oil because of a slowing global economy has caused oil prices to drop in recent weeks from their record highs of over $147 in Jul 2008. Some members of OPEC, which produces about 40% of world oil, have expressed concerns over the recent fall in prices, sparking speculation the cartel could cut output if the price falls below $100.

- Ever noticed that OPEC's "unofficial floor price level" keeps going up? When I first heard of such a concept, at that time the floor was $60, then it was $80, $90, and apparently it is now $100. Perhaps the OPEC countries are just trying to protect their $1 trillion dollars revenue stream for this year.

But hurricanes notwithstanding, I have not discounted the Beijing Olympics shutdown theory yet. The latest reports are that the Chinese will continue with their even-odd car-plate numbering scheme and maintain the factory shutdowns until around 20 Sep 2008, to give a "good impression" of clear blue skies to the tourists, athletes and their families who are staying on to tour the place after the games.

So while the Chinese locals and tourists alike can continue to enjoy clear skies for another month, crude oil investors may have to bear with this range-bound market, trading in the $10 interval between $110 and $120 till then. Of course, unless we get another Katrina or a Rita. Meanwhile, the hurricane season is young - we are still at G (Gustav) for now.

(2008-09-02 12:11:10 SGT) [Energy] Permalink

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