Oil prices fall; Saudi Arabia plans no cuts
Reuters
First Posted 02:01:00 09/12/2008
Filed Under: Markets & Exchanges, Oil & Gas - Downstream activities
NEW YORK — Oil prices fell toward $100 a barrel Thursday, pulled lower by strength in the US dollar, soft global energy demand, and a report Saudi Arabia had no plans to cut output despite OPEC's agreement this week to trim supply.
The losses were tempered somewhat by intensifying disruptions in the United States caused by Hurricane Ike, which paralyzed a quarter of US crude oil production and more than 16 percent of its refining capacity.
"This is a market that wants not only to test $100 a barrel but ultimately break $100," said Tom Knight, trader at Truman Arnold in Texarkana, Texas.
US crude fell $1.71 to settle at $100.87 a barrel after dipping as low as $100.10, the lowest level since early April. London Brent slipped $1.33 to $97.64 a barrel after dropping to a six-month low of $96.99.
Downward pressure came from a rising US dollar, which scaled a one-year high against the euro. A stronger dollar can weaken the purchasing power of buyers using other currencies — adding momentum to already flagging global consumption.
Encouraging the losses, the Saudi-owned Al Hayat newspaper said Thursday that Saudi Arabia had no plans to cut oil output at present unless customer demand falls.
The report came a day after OPEC members agreed to trim back output following a steep decline in oil prices since the peak above $147 a barrel hit in mid-July.
Limited support came from Hurricane Ike, which paralyzed about a quarter of US crude oil production and more than 16 percent of its fuel production capacity Thursday.
The storm gathered strength as it churned through the Gulf of Mexico's warm waters on a track that would take it west of the Houston energy hub by Saturday morning.
Experts said the storm could cause damage to some coastal refineries, leaving them shut for weeks.
"Based on the size and projected strength of Ike, I fear the potential exists for a massive storm surge ranging from 10 to 15 feet, maybe higher, along with heavy wave action that will inundate and severely damage the huge refinery complex across Galveston Bay and Texas City," said Jim Rouiller, meteorologist for private forecaster Planalytics.
The US energy sector has already been forced to evacuate workers and batten down refineries at least four times so far this summer due to storms that have pushed into the Gulf of Mexico, starting with Hurricane Dolly in mid-July.
Storms this year have cut more than 15 million barrels of crude oil production, nearly three-quarters of what the United States consumes in a day, according to government data.
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