Oil fell below $112 a barrel on Tuesday to hit a four-month low, as concerns over possible supply disruptions in the Gulf of Mexico were quashed after a tropical storm swept through without causing major damage.
US crude fell 97 cents to $111.90 a barrel by 0644 GMT, or about 24% lower than its peak of more than $147 in mid-July. At one point, it fell as low as $111.64, the lowest level since April 11. London Brent crude dropped 89 cents to $111.05 a barrel. “There is strong support for prices to drift lower towards $100 a barrel. We are only about $10 a barrel away, and I won’t be surprised to see $105 a barrel by next month,” said Jonathan Kornafel, Asia director at US-based options trader Hudson Capital Energy.
Prices fell as concerns over a possible supply disruption in the Gulf of Mexico eased. Tropical Storm Fay swept over the Florida Keys with heavy rain and 60 mph (97 kph) winds and churned towards the Florida mainland on Monday after killing more than 50 people in the Caribbean. But the sixth storm of the 2008 Atlantic season did not reach hurricane strength before rolling across the vulnerable, low-lying Florida island chain, where authorities reported minor flooding.
But even as Fay passed, energy markets started eyeing another low-pressure system about 725 miles (1,167 kilometers) west-southwest of the Cape Verde islands. “The hurricane season is still a major issue as seen in 2005 with Katrina. We have to be mindful of that,” said Peter McGuire, managing director of Commodity Warrants Australia. Also continuing to keep a lid on crude prices were the US mortgage crisis, consumers’ anxiety over a worsening job market and a weakening economic outlook in Europe.
Home builder sentiment in the US was at a record low in August, depressed by ever-tighter lending conditions and a flood of foreclosed homes, data from the National Association of Home Builders showed. Security risks still featured with Russian troops and tanks deployed in several areas of Georgia on Tuesday, in apparent defiance of Western pressure to withdraw quickly.
BP Plc said exports of Azeri oil by rail to Georgia had stopped because of damage to a railway line in Georgia. But as Kornafel of Hudson Capital Energy said: “Nobody seems to be paying too much attention to that ... crude prices will drift lower at a slow and leisurely pace.” (Reuters)