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Bloomberg: Oil Falls a Second Day as Production Rises in Gulf of Mexico

By Gavin Evans and Christian Schmollinger

Sept. 24 (Bloomberg) — Crude oil fell for a second day in New York as producers in the Gulf of Mexico returned workers to rigs and platforms after a storm threat passed.

Daily U.S. oil output in the Gulf increased by 161,989 barrels since Sept. 22, the nation’s Minerals Management Service said yesterday. Producers including BP Plc and Royal Dutch Shell Plc sent workers back to the region after a tropical depression made landfall without becoming a storm. September is the busiest month of the Atlantic hurricane season.

“It’s been a season of threats for the most part” rather than actual production losses, said David Moore, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “The weather is still going to be factor in the near term.”

Crude oil for November delivery fell as much as 56 cents, or 0.7 percent, to $81.06 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $81.15 at 2:05 p.m. in Singapore.

The contract dropped 16 cents, or 0.2 percent, to $81.62 on Sept. 21, trimming its gain for the week to 4.5 percent. The October contract reached a record $83.90 on its last day of trading on Sept 20.

New York oil prices have gained 10 percent this month as hurricanes threatened oil output in the Gulf of Mexico, source of about a quarter of U.S. production. Declining stockpiles in the U.S. added to concern that supplies may not be adequate to meet peak demand in the fourth quarter.

Brent crude oil for November settlement fell 40 cents, or 0.5 percent, to $78.90 on the London-based ICE Futures Europe exchange at 2:06 p.m. in Singapore. It rose 21 cents, or 0.3 percent, to $79.30 on Sept. 21, the highest since the contract was introduced in 1989.

Risk Downgraded

The U.S. National Hurricane Center yesterday canceled a reconnaissance flight over a weather system near the Yucatan Peninsula previously considered to pose a strengthening risk.

“Upper-level winds over this system are currently very strong and development, if any, is expected to be slow to occur,” the center said in an advisory on its Web site.

Low pressure weather systems east of the Windward Islands and in the mid-Atlantic may also become tropical depressions in coming days, the center said.

World oil demand peaks in the fourth quarter as refiners make heating fuel for the Northern Hemisphere winter. The “spectacle” of sliding U.S. stockpiles and the potential for further U.S. dollar weakness will likely keep prices in the high $70s for the next few months, Commonwealth’s Moore said.

“We’ve seen a little bit of a reassessment of where the oil prices may settle in the medium run,” he said.

Net-Long Increase

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended Sep. 18, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 54,172 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 9,932 contracts, or 22 percent, from a week earlier.

New York oil for December delivery fell 39 cents to $80.25 a barrel today after closing unchanged at $80.64 on Sept. 21. January oil declined 46 cents to $79.54 a barrel today after rising 4.6 percent to $79.99 last week.

MEND Attacks

Attacks on Nigerian oil facilities and kidnappings of foreign workers will resume after the arrest of a militant leader, the Movement for the Emancipation of the Niger Delta said in an e-mailed statement yesterday.

The group, known as MEND, announced a cease-fire on June 2 as it released six Chevron Corp. workers held since May 1.

Nigeria is Africa’s biggest oil producer. Attacks by MEND and other militant groups seeking a greater share of the nation’s oil wealth have cut output by as much as a quarter the past two years.

“A disruption of the transport infrastructure or the pipeline infrastructure there may have an impact on prices, especially the Brent price,” said Andrew Harrington, commodities analyst at Australia & New Zealand Banking Group Ltd. in Sydney.

To contact the reporters on this story: Christian Schmollinger in Singapore at [email protected] ; Gavin Evans in Wellington at [email protected]

Last Updated: September 24, 2007 02:13 EDT

 

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