Bloomberg: Crude Oil Falls as Hurricane Forecast to Miss Gulf Platforms

By Gavin Evans and Angela Macdonald-Smith
 
Traders work in the crude oil options pit Aug. 20 (Bloomberg) — Crude oil fell in New York on signs Hurricane Dean’s more southerly track may mean it will miss the largest oil production regions of the Gulf of Mexico.

Dean, an “extremely dangerous” Category 4 hurricane, is passing just to the south of Jamaica and may cross Mexico’s Yucatan Peninsula tomorrow, the National Weather Service said in its latest advisory. The Gulf of Mexico accounts for about 27 percent of U.S. oil output, mostly along the northern coast between Texas and Florida.

“The movement in Hurricane Dean, which is obviously fairly intense and posing a danger to islands in the Caribbean, isn’t now being seen as quite as much of a threat to U.S. production in the Gulf of Mexico,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “The predicted path is for the hurricane to stay very much in the southern part of the Gulf.”

Crude oil for September delivery dropped as much as 94 cents, or 1.3 percent, to $71.04 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $71.27 at 10:04 a.m. in Singapore.

On Aug. 17 the contract rose 98 cents, or 1.4 percent, to $71.98 a barrel after the U.S. Federal Reserve cut its bank lending rate to restore confidence in U.S. markets. Oil plunged 3.2 percent the day before when concerns about increasing U.S. home loan defaults pushed equity markets to a five-month low.

The eye of Hurricane Dean, with 145-mile-an-hour winds, “will be passing very near the southwestern coast of Jamaica during the next several hours,” the weather service said at 8 p.m. in New York. It may strengthen to Category 5 Monday local time, the highest level on the Saffir-Simpson scale of storm intensity.

Midweek Landfall

“Latest global models are trending the forecast track of Dean southward,” AccuWeather Inc. meteorologist Frank Strait said on the company’s Web site. “This would favor another landfall on the northern Mexico Gulf coast around midweek, which would be better news for U.S. interests.”

U.S. and Mexican oil and gas producers evacuated some offshore Gulf of Mexico platforms and rigs, curtailing output.

Six of the 834 manned oil and gas platforms along the U.S. Gulf Coast have been evacuated, the U.S. Interior Department’s Minerals Management Service said yesterday. That’s shut about 1.8 percent of the Gulf’s 1.3 million barrels of daily oil production and 0.7 percent of the region’s natural gas.

Campeche Sound in the southern Gulf is home to the world’s third-largest oil field. Petroleos Mexicanos, Mexico’s state- owned oil monopoly, plans to evacuate 13,360 workers from its oil platforms in the sound today, reducing output by as much as 400,000 barrels of oil per day.

BP, Shell

BP Plc and Royal Dutch Shell Plc evacuated non-essential workers and Shell shut down daily production of 23,000 barrels of oil output and 47.5 million cubic feet of gas. Transocean Inc., the world’s largest offshore driller, said it plans to evacuate all 93 employees from a second of its semi-submersible drilling rigs by the end of today, according to spokesman Guy Cantwell.

In 2005, Hurricanes Katrina and Rita damaged platforms along the Louisiana and Mississippi coasts.

Reduced concern about potential damage to oil and gas platforms from Dean probably outweighed any effect on the futures market of increased unrest in Nigeria and the possibility of disruption to supplies from the African nation, Commonwealth Bank’s Moore said.

A Nigerian union representing senior oil industry workers said Aug. 17 it may call an emergency meeting of its leadership to order members to leave Port Harcourt, where dozens of people have died in clashes between the military and gangs. The government imposed a dusk-to-dawn curfew for a week in an effort to end the violence, the Guardian reported Aug. 18, citing local officials.

To contact the reporter on this story: Gavin Evans in Wellington at [email protected] Angela Macdonald-Smith in Sydney at [email protected]

Last Updated: August 19, 2007 22:19 EDT

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