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Oil Prices Drop Below $59 Per Barrel

Oil Prices Drop Below $59 Per Barrel
Monday July 11, 12:07 am ET
By Gillian Wong, Associated Press Writer

Oil Prices Drop Below $59 Per Barrel As Hurricane Dennis Misses Oil Refineries in Gulf of Mexico

SINGAPORE (AP) -- Oil prices dropped almost a dollar to open the week Monday, falling below $59 on news that Hurricane Dennis missed oil refineries in the Gulf of Mexico, calming markets that feared an unplanned supply disruption in a time of high demand.

Midmorning in Singapore, light, sweet crude for August delivery slipped 82 cents to $58.81 a barrel on the New York Mercantile Exchange in after-hours electronic trading. On Friday, crude dropped by $1.10 to settle at $59.63 per barrel.

Heating oil fell by more than a penny to $1.6980 a gallon while gasoline declined nearly two cents to $1.7354.

Hurricane Dennis pounded the Alabama-Florida coast over the weekend, sending residents from the Florida Keys to Louisiana fleeing its 120 mph winds. The storm was earlier responsible for at least 20 deaths in the Caribbean.

Traders feared a repeat of last year's Hurricane Ivan, which damaged oil platforms and resulted in months of lost production in the Gulf of Mexico. But the region's oil facilities, the source of 30 percent of U.S. output, weathered Hurricane Dennis largely unscathed.

"The market will continue to expand last Friday's sell-off given that there's minimal damage caused by the hurricane," said analyst Victor Shum of Texas-headquartered energy consultants Purvin & Gertz in Singapore.

Futures on Friday rose as high as $61.90 per barrel on hurricane concerns but the rally lost steam amid speculation that the power of Dennis might not be as intense as originally feared, leading traders to take some chips off the table.

Shum said he expected prices to slip further in the short term as the market consolidated, but said they would rise again because of the perceived long-term problem of supply tightness.

"Traders remain on the bullish side given concerns about the tight supplies, especially looking ahead at the fourth quarter. These concerns have not been allayed," he said.

While there is enough oil and gasoline on the market to meet demand, some traders are concerned about the ability of producers and refiners to keep up with peaking winter season demand.

Global oil demand is expected to average more than 84 million barrels per day this year, leaving an estimated 1.5 million barrels per day in excess production capacity that can be tapped in the event of a supply disruption.

At the Group of Eight industrialized nations summit in Gleneagles, Scotland, on Friday, Russian President Vladimir Putin said he will increase Russia's oil exports. At present, Russia produces about 470 million metric tons (518 million U.S. tons) annually, of which 230 million metric tons are exported. Putin said the export numbers could rise by as much as 40 million metric tons, but provided no further details.

Also Monday, China's crude oil imports was up 3.9 percent in the first half of 2005 on year, the official Xinhua News Agency reported. Beijing imported 63.4 million U.S. tons from January to June, Xinhua said.

China is the world's second largest consumer of crude behind the United States.

Crude oil futures are more than 50 percent above year ago levels, though still below the inflation-adjusted high above $90 a barrel reached in 1980.


LINK: http://biz.yahoo.com/ap/050711/oil_prices.html?.v=1