AP
Oil Prices Fall As Storm Worries Ease
Monday August 20, 6:31 pm ET
By Madlen Read, AP Business Writer
Oil Prices Resume Drop As Worries Ease About Hurricane Damage to Gulf's Oil Rigs, Refineries


NEW YORK (AP) -- Oil and natural gas prices fell Monday as Hurricane Dean headed toward Mexico's Yucatan Peninsula and away from the U.S. energy facilities along the Gulf Coast.

A few companies evacuated some rigs and suspended production, but it didn't appear that the storm would cause much damage to operations in the United States. As supply worries faded, concerns about the battered stock market's drag on global demand came to the forefront once more.

Though the Federal Reserve boosted stocks Friday when it cut the rate it charges banks by a half percentage point, Wall Street waffled Monday on continuing credit worries, keeping alive fears that investors may need to liquidate more assets to cover losses and that a cooling economy may dampen energy demand.

Many speculative investors -- those looking to make fast money, as opposed to commercial investors who use the market to hedge their interests -- have exited the market, said Wachovia Corp. economist Jason Schenker. He added that gasoline demand has fallen for the past four consecutive weeks and is likely to weaken further as the summer driving season winds down.

With demand falling and investors nervous about committing cash to the market, crude prices have weakened. The possibility that Hurricane Dean could strike the Gulf's key oil facilities lifted crude by about a dollar a barrel Friday, but as that danger lifted Monday, crude resumed its plunge.

"On the U.S. domestic market, the hurricane veering to Mexico has gassed the hopes of speculators who were betting on damage," said MF Global analyst Andrew Lebow, who pointed out that energy prices across the board -- crude oil, gasoline, heating oil and natural gas -- all tumbled.

"They're all getting clobbered pretty bad," Lebow said.

Light, sweet crude for September delivery fell 86 cents to settle at $71.12 a barrel on the New York Mercantile Exchange.

However, the crude contract finished up from its intraday low of $70.05 a barrel, after a Mexican oil company said it was halting production and as the Dow Jones industrials rebounded from earlier declines.

Natural gas futures plummeted 97 cents, more than 13 percent, to settle at $6.04 per 1,000 cubic feet.

Gasoline prices dropped 10.23 cents, or 5 percent, to settle at $1.9365 a gallon.

As gasoline futures have fallen, so has the retail price of gasoline. According to AAA, the average roadside price for a gallon of regular, unleaded gasoline was $2.768 on Monday, down from $2.988 a month ago and down from its record high in May of $3.227.

Hurricane Dean, which uprooted trees and tore roofs from homes as it skirted the southern coast of Jamaica on Sunday, was expected to slam into Mexico's Yucatan Peninsula late Monday. The storm strengthened over the weekend to maximum sustained winds of 150 miles per hour and could dump up to 20 inches of rain.

The storm is a powerful Category 4, and could reach the highest level, Category 5, with maximum winds greater than 155 miles per hour later in the day, the U.S. National Hurricane Center in Miami said in its latest advisory.

The U.S. Minerals Management services said Monday that Dean led U.S. energy producers in the Gulf to evacuate 10 of the 834 manned platforms in the region, and to temporarily suspend about 3.2 percent of the Gulf's usual daily crude production and 1.3 percent of its normal natural gas production.

Though Dean was unlikely to have any lasting effect on U.S. production, it has the potential to dampen the nation's Mexican imports.

State-run oil company Petroleos Mexicanos on Monday evacuated about 14,000 rig workers and halted production.

In May, about 50 million barrels, or 11 percent, of the 439 million barrels of crude oil and oil products that the United States imported from other countries came from Mexico.

In other Nymex trading, heating oil futures lost 3.64 cents to settle at $1.9631 a gallon.