| Elite Member
Join Date: Jul 2005 Location: In a rather cold and dark place
Posts: 10,517
| Quote:
Oil Falls to 6-Week Low as Storm May Miss Fields, Dollar Rises
By Mark Shenk
July 22 (Bloomberg) -- Crude oil fell more than $3 a barrel, dropping to a six-week low, on forecasts a tropical storm in the Gulf of Mexico will miss oil installations and the dollar rebounded against the euro, reducing the appeal of commodities.
Oil declined below $126 a barrel, down more than $21 from a record $147.27 reached on July 11, as Tropical Storm Dolly moved toward the Texas border with Mexico. The dollar rose on signs that U.S. interest rates may increase. Senate Democrats today cleared the first hurdle for legislation that aims to curb speculation in energy markets.
``There are dual causes to today's move lower,'' said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``There's a strong move by the dollar, which always puts pressure on energy prices. We aren't worried about Dolly anymore, also putting pressure on prices.''
Crude oil for August delivery fell $3.09, or 2.4 percent, to settle at $127.95 a barrel at 2:58 p.m. on the New York Mercantile Exchange, the lowest settlement price since June 5. Futures are up 69 percent from a year ago. The August contract expired today. The more-active September contract declined $3.40, or 2.6 percent, to settle at $128.42 a barrel.
The number of outstanding oil futures in New York dropped to the lowest in 17 months as oil companies, refiners and institutional investors exited the market. Open interest fell 2.6 percent yesterday to 1.23 million contracts on the Nymex, according to data from the exchange.
Gasoline for August delivery fell 7.01 cents, or 2.2 percent, to $3.147 a gallon in New York, the lowest close since May 8. Futures reached a record $3.631 a gallon on July 11.
Lower Pump Prices
Pump prices are following changes in futures. Regular gasoline, averaged nationwide, fell 1.4 cents to $4.055 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices reached a record $4.114 a gallon on July 17.
U.S. gasoline demand fell 3.3 percent last week from a year ago, the 13th consecutive weekly decline, as Americans react to record pump prices by driving less, a MasterCard Inc. report today showed.
Dolly strengthened over the Gulf of Mexico, and may become a hurricane before making landfall, the U.S. National Hurricane Center said today. Offshore fields in the Gulf are responsible for about 25 percent of U.S. oil production.
The storm's maximum sustained winds strengthened to almost 70 miles (110 kilometers) per hour, the agency said in an advisory on its Web site at 1 p.m. central time. Dolly was 195 miles southeast of Brownsville, Texas, and moving west at 10 mph, with a turn toward the west-northwest forecast.
Oil producers shut about 4.7 percent of production in the U.S. Gulf of Mexico, as they evacuated personnel from 49 platforms and six rigs in preparation for the storm, the government's Minerals Management Service said today.
Katrina and Rita
U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita shut refineries and platforms as they struck the Gulf of Mexico coast in August and September 2005. Katrina shut 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the hurricanes.
Brent crude oil for September settlement dropped $3.06, or 2.3 percent, to settle at $129.55 a barrel on London's ICE Futures Europe exchange, the lowest since June 5.
The dollar increased 0.9 percent to $1.5775 per euro at 3:40 p.m. in New York, from $1.5922 yesterday. It fell to $1.6038 on July 15, the weakest since the European currency's 1999 debut.
The U.S. currency rose as Treasury Secretary Henry Paulson predicted lawmakers will pass a bill this week to shore up confidence in Fannie Mae and Freddie Mac. Federal Reserve Bank of Philadelphia President Charles Plosser said the Fed should raise interest rates ``sooner rather than later'' to lower inflation.
Speculation Measure
Legislation introduced by Senate Democrats won approval to proceed to debate, in a 94-0 vote today. Democrats said the measure could reduce oil prices as much as 50 percent.
``The fact that they were unanimous is surprising,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``It will make the market more transparent, which is a good first step. There doesn't appear to be anything in the legislation that is so onerous that it would hurt the futures market.''
Legislation requires the Commodity Futures Trading Commission to impose limits on speculative trading in oil and natural gas futures markets. It also requires more reporting in energy markets to prevent market manipulation.
``This has the potential to move some people out of the market,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``That alone may be enough to spur some selling.''
Airlines, truckers and chemical makers have been hurt by the rise in fuel prices and their limited ability to pass on the costs to consumers. United Airlines parent UAL Corp., US Airways Group Inc. and JetBlue Airways Corp. today posted losses for the second quarter.
To contact the reporter on this story: Mark Shenk in New York at mshenk1[at]bloomberg.net.
| Bloomberg.com: Commodities |