Oil falls in Asia on global demand concerns
Oil prices dipped toward $109 a barrel as investors shifted attention to concern over slowing global demand for crude.Updated: Sep 03, 2008 10:40 IST
Oil prices dipped toward $109 a barrel on Wednesday as investors shifted attention to concern over slowing global demand for crude after Hurricane Gustav left oil installations in the Gulf of Mexico region largely undamaged.
Light, sweet crude for October delivery was down 33 cents to $109.38 a barrel in electronic trading on the New York Mercantile Exchange midday in Singapore.
On Tuesday, the contract settled at $109.71 a barrel, down $5.75 from the close of trading Friday, before the Labor Day weekend. US floor trading was closed Monday. At one point Tuesday, it fell as $105.46, the lowest since April.
Since oil prices reached a record US$147.27 on July 11, sentiment among traders has shifted to expect slowing economic growth in the US, Europe and Japan will likely spread to developing countries and undermine crude demand.
"That's been a focus of the market, that the demand side has weakened, particularly in developed countries like the US," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. "Had it not been for the hurricane, we would have seen a lower price profile over the last week."
Virtually all oil and natural gas production remained shut down in the Gulf of Mexico, according to the US. Minerals Management Service. It was too soon to say when output might resume, though some oil companies were preparing to redeploy evacuated personnel as early as Wednesday.
Without serious damage, oil and natural gas facilities should start up again in a day or two, while coastal refineries could take two to four days to resume production, depending up their size. In 2005, Hurricanes Katrina and Rita knocked out the region's offshore energy infrastructure for several weeks.
Also weighing on oil Wednesday was a stronger dollar versus the euro. A rising dollar encourages investors who bought oil as a hedge against inflation to sell. The euro fell to 1.4494 against the dollar while the dollar rose to 108.83 yen.
"It's certainly a factor," Moore said. "At the very least, oil has an intrinsic value, so movements in the US dollar has a valuation affect on oil in dollar terms."
Investors were also waiting for a report from the US Energy Department's Energy Information Administration on US oil, gasoline and distillate stocks for the week ended August 29 later in the day.
The EIA said last week that crude stockpiles fell slightly by 100,000 barrels to 305.8 million barrels for the week ending Aug. 22, while gasoline stocks dropped 1.2 million barrels. In other Nymex trading, heating oil futures rose 0.75 cent to $3.0811 a gallon, while gasoline prices lost 0.63 cent to $2.7274 a gallon. Natural gas for October delivery fell 9.7 cents to $7.164 per 1,000 cubic feet.
In London, October Brent crude fell 31 cents to $108.03 a barrel on the ICE Futures exchange.