LITTLE ROCK — Crude oil fell Wednesday as Royal Dutch Shell PLC and ConocoPhillips reported that Hurricane Gustav caused no damage to platforms in the Gulf of Mexico.
Exxon Mobil Corp. reported Wednesday that workers were returning to offshore platforms that were not in the direct path of Gustav.
Oil fell 5.9 percent this week as the euro dropped to a sevenmonth low against the dollar. Prices rebounded from the session's lows on forecasts that tropical storms were forming in the Atlantic.
"The next number we are going to test is $100," said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. "One hedge fund has shut down and the demand picture here has been ugly, so the market will remain under downward pressure."
Crude oil for October delivery fell 23 cents to $109.48 a barrel at the close of floor trading on the New York Mercantile Exchange. Prices, which are up 46 percent from a year ago, are 26 percent lower than the record of $147.27 reached on July 11.
The last time oil futures fell to $109 was April 7, when a gallon of regular gasoline in Arkansas cost $3.23 per gallon. Regular cost about 35 cents more Wednesday.
The difference results from the typical effects of hurricanes on oil supplies and refining capacity, said James Williams, an energy economist and owner of WTRG Economics near Russellville.
"Oil is a very international commodity," Williams said. "Even if there's a hurricane in the Gulf and it slows U.S. production, it doesn't slow the rest of the world, and it doesn't affect oil prices much." However, 15 million barrels of petroleum products are refined daily in the United States, Williams said, and Americans use about 20 million barrels a day. "It's a much larger portion of our supply than is crude oil," William said. "Crude oil, that can come from anywhere.... But refined products are mostly done here in the U.S." Even if there's no damage, refineries are usually shut down and then take at least three days to come back online, Williams added. "So refined products react more to hurricanes than crude oil does."
Phil Flynn, senior trader at Alaron Trading Corp. in Chicago, said, "Most of the news about damage has been reassuring. I think the market would be falling out of bed if it weren't for Hanna, Josephine and Ike. There's a line of storms forming in the Atlantic that has got to have traders worried."
The Louisiana Offshore Oil Port, the biggest U.S. oil-import terminal, remains without power after Hurricane Gustav and is assessing when it can reopen.
"We need to get our generators in place and make sure that all our equipment checks out before we can start back up," Barb Hestermann, a spokesman for the port, said Wednesday. "We also have to make sure that all the pipelines between us and the refineries are running andcan carry the oil."
The offshore terminal was shut at 10 a.m. Saturday, and the offshore oil port stopped shipments from its onshore operations Sunday.
Shell said in an e-mailed statement Tuesday that initial reports indicate no major damage to the oil producer's onshore facilities in Louisiana. ConocoPhillips said there was no "significant damage" to its Magnolia platform in the Gulf.
Anadarko Petroleum Corp. restarted production at its Nansen and Boomvang platforms in the Gulf on Tuesday and is returningworkers to offshore facilities that were outside the path of Gustav. Anadarko was producing the equivalent of about 150,000 barrels a day of oil from the region before the output was shut in preparation for the storm.
About 96 percent of crude-oil production in the Gulf and 92 percent of natural-gas output remains halted because of Gustav, the U.S. government reported. Producers reported that 91 rigs and 599 platforms remain evacuated because of the storm, the Minerals Management Service reported Wednesday in a statement on its Web site.
About 1.2 million barrels of daily oil production remain shutin, along with 6.7 billion cubic feet of gas.
The euro fell to the lowest in more than seven months against the dollar after reports showed business investment, exports and retail sales declined, adding to evidence of an economic slump in the single-currency region.
The euro declined to $1.4385, the lowest since Jan. 22, before trading at $1.4474 in New York, down from $1.4520 Tuesday.
The dollar's recovery will cause the decline in oil prices to continue, Organization of Petroleum Exporting Countries President Chakib Khelil said Wednesday in a phone interview, adding that he expects supply to outstrip demand by as much as 1 million barrels a day in the first half of 2009.
OPEC will meet on Sept. 9 in Vienna, Austria, to review production targets.
"There is going to be a lot of talk from OPEC because of the drop in prices," said Hodge, the MFC Global Investment Management executive. "Iran and Venezuela will want to defend high prices at all costs because they need the funds, given all of their social spending.
The Saudis might actually want to see prices fall a bit more."
Brent crude oil for October settlement fell 24 cents to $108.10 a barrel on London's ICE Futures Europe exchange.
Information in this article was contributed by Grant Smith and Margot Habiby of Bloomberg News and Laura Stevens of the Arkansas Democrat-Gazette.
Business, Pages 27, 32 on 09/04/2008