Oil falls as Gustav seen not gaining strength


LONDON — Oil prices fell below earlier Monday highs above US$118 a barrel as weather forecasters said Hurricane Gustav was not gaining strength as it advanced toward Louisiana. Still, precautions due to Gustav prompted companies to shut down drilling and refining operations in the Gulf Coast region. At midday in Europe, light, sweet crude for October delivery was down 77 cents to US$114.69 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it reached a high of US$118.25 before retreating. On Friday, the contract fell 13 cents to settle at US$115.46 a barrel. In London, October Brent crude was down 79 cents to US$113.26 a barrel on the ICE Futures exchange. U.S. trading was closed Monday for Labor Day. “There’s no question the drilling platforms in the Gulf of Mexico and the big refineries between Houston and New Orleans are in the path of this hurricane,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. “There’s likely to be some damage. We could see an extended period of disruption.” Some analysts, however, said the market’s response to Gustav was not as strong as some predicted. U.S. energy risk management firm Cameron Hanover described reaction as “extremely subdued.” “The best reasons we can give for that are the strength of the U.S. dollar, the continuing decline in consumer demand and the market’s recent trend lower,” a Cameron Hanover report said. “The reaction is telling us that this market just does not have the stomach it once did for higher prices.”

Oil companies are shutting down productions and evacuating facilities ahead of the storm. Exxon Mobil Corp., Royal Dutch Shell PLC and Valero Energy Corp., North America’s largest refiner, were among the companies that said they had shut down Gulf Coast refineries, primarily in south Louisiana.

Altogether, about 2.4 million barrels of refining capacity have been halted, roughly 15 percent of the nation’s total, according to figures from Platts, the energy information arm of McGraw-Hill Cos. The U.S. Gulf Coast is home to nearly half the nation’s refining capacity.

In the U.S., the average retail gasoline price was down slightly to US$3.686 a gallon, the auto club AAA, the Oil Price Information Service and Wright Express reported Monday. The price rose slightly more than a penny Saturday. Gasoline prices peaked on July 17 at US$4.114 a gallon.

In other Nymex trading, heating oil futures rose 0.22 cent to US$3.1939 a gallon, while gasoline prices gained 0.84 cent to US$2.8626 a gallon. Natural gas for October delivery fell 20.3 cents to $7.74 per 1,000 cubic feet.