Oil prices dropped below US$59 a barrel in Asian trade yesterday after Hurricane Dennis, which wreaked havoc in the US, missed Gulf of Mexico refining facilities, dealers said.
At 4pm, the benchmark New York contract for light sweet crude in August, was at US$58.79 a barrel, down US$0.84 from its closing price of US$59.63 in the US on Friday.
The factor having the most impact on the market yesterday was the Gulf of Mexico refineries escaping Hurricane Dennis, according to Victor Shum, a Singapore-based analyst with US energy consultancy Purvin and Gertz.
"The storm had an effect more on the east coast, fortunately leaving the refining facilities undamaged," Shum said.
Hurricane Dennis hit the US on Sunday, killing at least one person after claiming 16 lives in the Caribbean.
US President George W. Bush declared Florida, Alabama and Mississippi to be in a state of "major disaster" because of the hurricane.
A similar hurricane, Ivan, hit Gulf of Mexico facilities last year, sending global oil prices spiralling upwards at the time.
Shum said he expected prices to continue falling into US trade later yesterday but with the continued concerns over tight global supply, prices would stay near record highs in the short term.
Shum also said the market would remain volatile, after prices hit a record high of US$62.10 on Thursday, then plunged US$4.08 following the terrorist bombings in London before climbing back towards US$60 again.
"The market will continue to be volatile and react to short-term news ... I would expect the market to trade within the same range as last week," he said.
"Overall, the market remains bullish [positive on prices] because of supply tightness concerns, particularly for the last quarter of the year [when the northern hemisphere winter begins]," Shum said.
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