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Oil & Gas

Gustav brings little damage, Oil prices plunge

September 02, 2008
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Oil prices plunged to the lowest level in five months Tuesday, falling to within sight of $100 a barrel on signs that Hurricane Gustav only grazed U.S. energy infrastructure in the Gulf of Mexico, according to the Associated Press. Light, sweet crude for October delivery fell $5.75 to settle at $109.71 a barrel on the New York Mercantile Exchange. It was the lowest trading level since April 4. Virtually all oil and natural gas production remained shutdown in the Gulf of Mexico as energy companies began assessing damage to offshore platforms, rigs and pipelines, according to the U.S. Minerals Management Service. It was too soon to say when output might resume, though some oil companies were preparing to redeploy evacuated personnel as early as Wednesday. Without serious damage, oil and natural gas facilities could start up again in a day or two, while coastal refineries could take two to four days to resume production, depending up their size. Royal Dutch Shell PLC, BP PLC and other major oil companies were conducting flyovers of platforms and rigs Tuesday, searching for major signs of damage or oil spills. More than 80 percent of energy production platforms and rigs in the Gulf were evacuated before the storm. After the storm was downgraded to a tropical depression early Tuesday, oil market traders quickly turned their attention to slowing global economic growth, speculating that demand for crude will be dampened. Also weighing on oil Tuesday was a stronger dollar versus the euro. A rising greenback encourages selling from investors who bought oil as a hedge against inflation. However, crude prices could recover if the dollar weakens again or if oil-producing countries cut back on output to keep prices high, as some analyst have speculated. The Organization of the Petroleum Exporting Countries is scheduled to meet Sept. 9 in Vienna and has indicated it may take action to defend the $100 a barrel level. Ahead of Gustav, about 2.4 million barrels of refining capacity was halted, roughly 15 percent of the U.S. total, according to figures from Platts, the energy information arm of McGraw-Hill Cos. Traders are also keeping an eye on other storms in the region as tropical storm Hanna threatens the Georgia and South Carolina coast later this week.

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