Oil tumbled to US$98 a barrel yesterday on signs Hurricane Ike may have spared key US energy infrastructure and as turmoil in the US financial system fanned global economic concerns.
US crude fell US$3.18 to US$98.00 a barrel by 0834 GMT to fresh six-month lows after a special trading session on Sunday held because of Hurricane Ike.
Oil also fell on concern that the US economy is slowing, reducing demand for fuels.
US oil had dropped below US$100 briefly on Friday for the first time since early April.
London Brent crude fell US$2.95 to US$94.63 a barrel.
Energy firms rushed to offshore facilities and coastal refineries to check for damage on Sunday after Hurricane Ike’s direct hit on the Houston energy hub left a quarter of US oil and refined fuel production idled and millions without power.
A total of 14 Texas and Louisiana refineries, with combined crude processing capacity of 3.57 million barrels a day, are shut because of Ike.
Early reports from emergency officials and oil companies indicated little or no severe damage to infrastructure — signaling a possible quick recovery to production —- though near-term supply problems were expected.
“We think in probably a week to 10 days we should have a majority of the refineries back up,” said James Cordier, founder of Tampa-based OptionSellers.com from New York. “Very little damage was done.”
The US Department of Energy released 309,000 barrels from its strategic reserves to ConocoPhillips and Placid Oil, which had trouble with supplies after the storm.
“The sell-off is partly because Hurricane Ike hasn’t done significant structural damage to oil facilities as well as growing concerns about the economy,” said David Moore, commodities strategist for Commonwealth Bank of Australia.
“It has been quite a spectacular turn of events at Lehman and Merrill and the stresses in the financial system are sparking concerns about economic outlook and how that will weigh on global energy demand,” he said.
“It looks like we’ve dodged another bullet,” said Peter Beutel, president of energy consultant Cameron Hanover Inc in New Canaan, Connecticut. “The refineries in the Houston area seem to have come out of the storm remarkably intact.”
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