Crude prices rise on hurricane concerns

Hurricane Gustav expected to disrupt oil production at the Gulf

Crude oil prices ended higher on Tuesday, 26 August, 2008 at Nymex. Prices rose on concerns that tropical Storm Gustav formed in the Caribbean Sea will disrupt oil production at Gulf of Mexico. But the strong dollar pushed back crude from the day’s highs.

Crude-oil futures for light sweet crude for October delivery closed at $116.27/barrel (higher by $1.16 or 1%) on the New York Mercantile Exchange. Prices rose to a high of $117.5. Last week, crude prices ended higher by 0.6%. Crude had lost $15.92 (11%) in July, 2008, the biggest ever single day drop in dollars. Prices are 64% higher than a year ago. Prices reached a high of $147 on 11 July but have dropped 21% since then.

As per reports, the hurricane, located 40 miles southwest of the Haitian capital, Port-au-Prince, was heading northwest at 10 mph. Forecasts from the Hurricane Center showed that Gustav was approaching eastern Cuba tomorrow. The hurricane is expected to move along the southern coast of Cuba and then between the island and the Yucatan Peninsula in Mexico, heading for the Gulf.

At the currency markets on Tuesday, the dollar index, which tracks the value of the dollar against a basket of other major currencies, climbed 0.6%. The index earlier traded up 1% on positive economic news at Wall Street.

Among economic news of the day at Wall Street, the Conference Board in USA reported today, that July consumer confidence spiked 9.6% to 56.9 from the previous month. This was much ahead of the expected 2.1% increase to 53.

In a monthly report issued by the EIA today, it said that total crude oil and products supplied, which is a good indication of domestic consumption, was at around 19.553 million barrels per day in June of this year. That was down from 20.737 million barrels per day a year earlier.

Crude prices had gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. It ended June 2008 higher by 9.9%. For the year, crude is up by 13.5% till date.

Against this background, October reformulated gasoline rose 8.7 cents, or 3%, to end at $2.9697 a gallon and October heating oil gained 5.8 cents, or 1.9%, to close at $3.2099 a gallon.

Natural gas in New York also rose considerably amid speculation that hurricane Gustav will slash through the Gulf of Mexico next week, paring output from production platforms. Natural gas for September delivery gained 45.3 cents (5.8%) to settle at $8.278 per million British thermal units.

At the MCX, crude oil for September delivery closed at Rs 5,104/barrel, higher by Rs 82 (1.6%) against previous day’s close. Natural gas for September delivery closed at Rs 370.5/mmbtu, higher by Rs 24.5/mmbtu (7.1%).