Oil rises as Ike bears down on Texas coast
Friday September 12, 10:41 am ET
Oil rises over $102 as Hurricane Ike threatens oil installations on Texas coast
NEW YORK (AP) -- Oil prices bounced back above $102 a barrel Friday as Hurricane Ike swept through Gulf of Mexico, prompting companies along the Texas coast to shut down refining and drilling operations.
Ike is forecast to land early Saturday as a Category 3 hurricane near Galveston, a barrier island about 50 miles southeast of Houston. The Houston region is home to about one-fifth of U.S. 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. 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.
Gasoline prices also rose. October gasoline futures climbed 8.97 cents to $2.8385 a gallon on Nymex, while the average U.S. retail price for gasoline edged up less than a penny to $3.675 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express.
Exxon Mobil Corp., Valero Energy Corp., ConocoPhillips and Marathon Oil Co. have begun halting operations as the Category 2 hurricane headed straight for the nation's biggest complex of refineries and petrochemical plants. U.S. wholesale gasoline prices spiked 30 percent Thursday.
As of Thursday, about 97 percent of crude production and 93 percent of natural gas production in the Gulf were shuttered, according to the Department of the Interior's Minerals Management Service.
Early Friday, the storm was centered about 370 miles southeast of Galveston, Texas, moving to the west-northwest at 12 mph. Top sustained winds were 100 mph. Ike is huge, taking up nearly 40 percent of the Gulf of Mexico. The National Hurricane Center said tropical storm-force winds of at least 39 mph extended across more than 510 miles.
Ike and last week's Hurricane Gustav have helped to stanch a sharp downturn in oil prices. Concerns over slowing economic growth on a global scale and a strengthening U.S. dollar have led funds to liquidate their commodities holdings, pushing crude prices down about 30 percent 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 U.S. economy that caused June fuel demand to fall more than 5 percent 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.
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.
Source: Associated Press
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