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Oil prices decline as Hurricane Dean threat diminishes

"Its [Dean's] trajectory is proving to be a far way south ... it's becoming less of a worry for the oil market"

Tobin Gorey, Commonwealth Bank of Australia commodities strategist

Oil prices fell in Asian trade yesterday as energy facilities in the US appeared to be safe for the time being from the fury of Hurricane Dean, dealers said.

At 2:20pm, New York's main contract, light sweet crude for September delivery, had fallen US$0.70 to US$71.28 a barrel from US$71.98 in late US trades on Friday.

Brent North Sea crude for October delivery dropped US$0.86 to US$69.58.

"Its [Dean's] trajectory is proving to be a far way south ... it's becoming less of a worry for the oil market," said Tobin Gorey, a commodities strategist with the Commonwealth Bank of Australia in Sydney.

"As the hurricane [threat] fades, they are focusing on the market turmoil," he said, referring to last week's turbulent financial markets, particularly equities, stemming from the troubled US subprime mortgage sector.

The US Federal Reserve's move to slash its discount rate also calmed financial markets but there is still a "question mark over demand for oil," Gorey said.

Oil traders are still trying to determine the fallout from the US subprime market crisis on economic growth which will subsequently affect energy demand, he said.

In a move aimed at boosting the liquidity of commercial banks, the US central bank on Friday slashed its discount rate by a half-percentage point to 5.75 percent.
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