Bloomberg: Oil Falls to 5-Month Low in New York as Supply Concern Eases

EXTRACT: Royal Dutch Shell Plc, the world’s second-largest publicly traded oil company, said its Mars platform in the Gulf was producing 20 percent more oil than before it was damaged and shut down by Katrina. The platform is currently producing 190,000 barrels of oil equivalent per day, the company said today in a statement. 

THE ARTICLE 

By Mark Shenk

Sept. 6 (Bloomberg) — Crude oil in New York fell, heading for the lowest close in five months, as concern eased that shipments from Iran, the fourth-biggest oil producer, will be curbed because of a dispute about the country’s nuclear program.

“We’ve run out of bullish news so prices should continue to drift lower,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The Iranian situation helped boost prices but after the deadline passed it became clear that nothing will happen anytime soon.”

German Chancellor Angela Merkel said she has ruled out attacking Iran for ignoring a United Nations demand to stop enriching uranium. Iran’s refusal to meet the Aug. 31 UN Security Council deadline may lead to sanctions. The U.S. and other nations suspect the material is destined for nuclear warheads. Iran says the fuel is intended for power production.

Crude oil for October delivery fell $1.05, or 1.5 percent, to $67.55 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. If the contract settles here it will be the lowest close since April 7. Prices surged to a record $78.40 on July 14 on speculation the conflict between Israel and Hezbollah would spread in the Middle East, source of almost a third of the world’s oil.

Israel will end its blockade of Lebanon at 18:00 local time tomorrow, Israeli Prime Minister Ehud Olmert’s office said. The blockade has been enforced since July 13, a day after Hezbollah fighters abducted two Israeli soldiers in a cross-border raid, sparking the 33-day conflict that killed more than 1,200 people in Lebanon and 159 people in Israel.

Cooling Rhetoric

“Temperatures and political rhetoric have cooled along with energy prices,” said Michael Fitzpatrick, vice president for energy risk management at Fimat USA in New York. “I still don’t believe we are moving to a market based just on supply and the economic realities. The next headline might move us right back up to where we were.”

Negotiators from the five permanent members of the UN Security Council, Russia, China, France, the U.K. and the U.S., plus Germany meet in Berlin tomorrow to discuss whether to impose sanctions.

“The military option isn’t an option,” Merkel told Parliament today, adding to comments she made Sept. 2. “We won’t close the door to negotiations.”

Germany is the first country involved in negotiations with Iran to rule out the use of force and Merkel’s pledge divides her position from that of President George W. Bush, who has repeatedly refused to do so.

Tropical Storm Florence

Tropical Storm Florence, hundreds of miles out to sea, is forecast to strengthen over the Atlantic on a track toward North America. Florence was about 800 miles east of the northern Leeward Islands, at 11 a.m. Miami time, the U.S. National Hurricane Center said in an advisory. The storm was moving west- northwest, away from oil fields in the Gulf of Mexico.

Last year Hurricanes Katrina and Rita damaged platforms in the Gulf and shut as much as 30 percent of U.S. refining capacity.

“Unless Florence makes a beeline for the Gulf, prices should move lower,” said Aaron Kildow, a broker at Prudential Financial Derivatives LLC in New York. “It’s highly unlikely that this storm will head to the Gulf. The hurricane season has been a disappointment for the bulls.”

Royal Dutch Shell Plc, the world’s second-largest publicly traded oil company, said its Mars platform in the Gulf was producing 20 percent more oil than before it was damaged and shut down by Katrina. The platform is currently producing 190,000 barrels of oil equivalent per day, the company said today in a statement.

Brent crude oil for October settlement declined $1.13, or 1.7 percent, to $66.96 a barrel on the London-based ICE Futures exchange. Futures touched $66.86, the lowest since June 14.

To contact the reporter on this story: Mark Shenk in New York at [email protected]

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