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Oil up slighty as Wilma takes control

"If we come back on Monday and there is no new hurricane and Wilma has not done any damage to oil and gas production, then I think traders will be selling almost in relief."

Peter Beutel, president of Cameron Hanover

Oil prices shook off early weakness and edged higher on Friday as Hurricane Wilma sent large swells into the Gulf of Mexico and forced several refinery operators to evacuate workers and shut down production platforms.

Wilma was still on track to spare the oil and gas production platforms and rigs concentrated in the central Gulf of Mexico.

But the US National Hurricane Center said that "large swells" could affect parts of the northern Gulf, and at least four oil companies operating in the Gulf area evacuated non-essential workers and shut down their production platforms.

With the latest shutdowns, the federal Minerals Management Service reported a slight increase in the amount of production that remains offline in the aftermath of recent hurricanes, and analysts say the percentage could rise further.

"After four days of rather extensive losses, traders decided to cover short positions before the weekend, largely because they were very much aware that the hurricane season is not over," said Peter Beutel, president of Cameron Hanover, a trading advisory firm in New Canaan, Connecticut.

The December crude futures contract rose US$0.61 to settle at US$60.63 a barrel on the New York Mercantile Exchange after dropping as low as US$59.15 a barrel, but failing to breaking below US$59.00 a barrel.

December Brent crude futures on London's International Petrol-eum Exchange rose US$0.57 to settle at US$58.48 a barrel.

"You held right above US$59, and some of the trade feels that below US$60 the market is a little cheap," said Bob Petti, a floor specialist with brokerage Zone Energy.

Nymex petroleum products futures ended mixed, with November gasoline up US$0.0268 at US$1.6399 a gallon and November heating oil down 34 points at US$1.8665 a gallon.

Tom Bentz, an analyst at BNP Paribas Futures in New York, said reports of more new production outages in the Gulf may have given prices a boost, but that the late rally was mostly technically triggered.

"Basically markets held, selling dried up and we got a short-covering rally," he said.

"Weak shorts got a little nervous ahead of the weekend," he said.

Friday's late rally left prices down on the week's average, with most analysts expecting the recent downtrend in prices to resume next week, barring a supply disruption.

"If we come back on Monday and there is no new hurricane and Wilma has not done any damage to oil and gas production, then I think traders will be selling almost in relief," Beutel said.

Prices have come under selling pressure since mid-last month when demand began wavering.

Data released on Wednesday by the federal Energy Information Administration showed unexpec-tedly large buildups in crude and gasoline stocks and a sharp up in refinery output added to the selling pressure.
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