Easing Gustav concern, strong dollar push oil down

Oil prices edged lower on Friday as worries over potential damage to oil refineries and platforms in the U.S. Gulf of Mexico subsided despite projections that Hurricane Gustav will enter the Gulf of Mexico as a major storm early next week.

• U.S. crude oil futures for October delivery settled at $115.46 a barrel, down 13 cents after flirting with $119 a barrel earlier in the day. London Brent crude settled 12 cents lower at $114.05 a barrel.
• “It’s surprising that relatively little hurricane premium has been added to the market. Perhaps it’s because refiners are at present running only at 87 percent (of capacity) compared to running at 97 percent when (Hurricane) Katrina hit,” said Nauman Barakat, senior vice president at Macquarie Futures USA.
• It “could be that at present demand destruction is the engine that’s driving the complex lower while at Katrina’s time of impact in August 2005 the talk was all about runaway demand,” Barakat added.
• U.S. energy companies began shutting down production and evacuated personnel in the Gulf, home to 25 percent of U.S. crude oil production and 15 percent of natural gas output.
• As Gustav churned through the Caribbean, another storm, Tropical Storm Hanna, formed in the Atlantic Ocean, on a path that could threaten the Bahamas and Florida, the U.S. National Hurricane Center said.
• “Right now, there is still uncertainty on where exactly Gustav will hit, and so it is difficult to determine the damage that the storm might bring,” said Mark Waggoner, president of Excel Futures in Huntington Beach, California.
• Renewed strength in the U.S. dollar put further downward pressure on oil prices. The dollar has risen by nearly 9 percent against the Euro since hitting a record low in mid-July as concerns over economic growth prospects outside the United States have mounted.
• “The dollar is up and so we’re seeing prices of crude move down from the highs. Remember that in 2005 the market sold off hard before Katrina’s arrival and then rallied again when it hit,” said Tom Knight, a trader at Truman Arnold in Texarkana, Texas.
• RUSSIAN SHIPMENTS
• Earlier Friday, oil prices received some support from a report in Britain’s Daily Telegraph newspaper citing a single unidentified source saying that the Russian government had told at least one of its oil companies to prepare for a possible cut in shipments to Europe in response to threatened sanctions.
• Russia’s second-largest oil producer, LUKOIL, denied the report. The country’s energy minister said Moscow was doing everything it could to ensure stable oil supplies to Europe and to keep its good name as an energy supplier.
• Traders were also eyeing a scheduled meeting of the Organization of Petroleum Exporting Countries on Sept. 9 where the group will review output policy.
• OPEC could cut output at the meeting but will most likely maintain current production levels, Venezuela’s Oil Minister Rafael Ramirez said on Thursday.