Oil dropped to a two-week low as producers worked to restore Gulf of Mexico output after Hurricane Isaac passed.
Prices fell 0.9 per cent as Isaac's threat to offshore production eased as the system weakened to a tropical storm over Louisiana. Oil also declined after 374,000 Americans filed applications for unemployment benefits last week, more than forecast. Crude extended losses as drops in equities accelerated and the US dollar rebounded against the euro.
“When they go out to the rigs they'll see nothing's really been damaged, and that means within three or four days you'll be back to business as usual,” said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $US1.4 billion. “The new normal is that claims don't go below 300,000 and unemployment stays elevated.”
Oil for October delivery dropped 87 cents to settle at $US94.62 a barrel on the New York Mercantile Exchange. Futures have declined 4.3 per cent this year. Prices are 7.4 per cent higher in August, heading for the biggest monthly gain since February.
Brent oil for October settlement rose 15 cents to $US112.69 a barrel on the London-based ICE Futures Europe exchange.
Isaac has halted 95 per cent of US oil production in the Gulf and 73 per cent of natural-gas output, the Bureau of Safety and Environmental Enforcement said today.
Restarting production
Eni SpA said it may restart production in the Gulf tomorrow, with employees returning as soon as today, if an inspection shows there was no damage to assets. Anadarko Petroleum Corp. said it expects to start restaffing locations in the central Gulf tomorrow and the eastern Gulf on Sept. 1. BP Plc, Chevron Corp. and Williams Cos. said they are assessing offshore facilities before returning workers there.
“I imagine that people will get back to work in the Gulf now that the storm has passed and it seems the damage is minimal,” said Bill Baruch, senior market strategist at Iitrader.com in Chicago.
Isaac, which pounded the New Orleans area on the seventh anniversary of Hurricane Katrina, was 25 miles (40 kilometers) southwest of Monroe, Louisiana, with top sustained winds of 40 miles per hour, the National Hurricane Center in Miami said in an advisory at 1 p.m. local time. It was moving north-northwest at 9 mph.
Two other systems strengthened in the Atlantic Ocean today, though neither was forecast to threaten land. Kirk became a hurricane about 1,500 miles west-southwest of the Azores. Tropical Storm Leslie, which is expected to grow into a hurricane later this week, is 1,125 miles east of the Windward Islands on a path away from the US and the Caribbean islands.
Gulf refineries
Placid Refining Co. LLC restarted its Port Allen, Louisiana, refinery early today, according to an e-mailed statement from the company. Five Louisiana refineries remained shut in the Gulf and another five were running at reduced rates, according to data compiled by Bloomberg.
“As long as refineries are not running, it just means more crude is getting backed up,” said Carl Larry, president of Oil Outlooks & Opinions LLC in New York. “We are not in an oversupplied market, but we are definitely in a market where enough crude is available.”
Oil inventories increased 1 per cent last week to 364.5 million barrels, the first gain in five weeks, the Energy Department reported yesterday.
US economy
Last week, 374,000 Americans filed applications for unemployment benefits, more than forecast in a Bloomberg survey of economists. The jobless claims were higher than the 370,000 expected by economists surveyed by Bloomberg.
The unemployment rate in the US climbed to a five-month high of 8.3 per cent last month, according to the Labor Department.
Oil prices also fell as stocks declined as reports from the US and Europe intensified concern that the global economy is cooling down. The Standard & Poor's 500 Index dropped as much as 1 per cent.
Federal Reserve Chairman Ben Bernanke is scheduled to speak tomorrow at the Kansas City Fed's economic-policy conference in Jackson Hole, Wyoming, amid speculation that the central bank will add to monetary stimulus to spur the economic recovery.
“I don't think there is going to be a stimulus announcement tomorrow,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is looking for a catalyst to reignite its rally.”
The dollar gained as much as 0.3 per cent against the euro after dropping as much as 0.3 per cent. A stronger dollar reduces oil's appeal as an investment alternative.
Electronic trading volume on the Nymex was 341,013 contracts as of 2:31 p.m. in New York. Volume totaled 368,240 contracts yesterday, 32 per cent below the three-month average and the lowest level since May 25. Open interest was 1.51 million, the most since May 16.