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Bloomberg: Crude Oil Is Little Changed as Risk of Storm Disruption Recedes

By Sophie Tan and Megumi Yamanaka

Oct. 1 (Bloomberg) — Crude oil was little changed in New York as the risk of supply disruption in the Gulf of Mexico receded after the peak hurricane season passed.

September is the busiest month of the Atlantic hurricane season and activity usually drops through October and November. The Gulf of Mexico accounts for about a quarter of U.S. oil production and half of U.S. refining capacity.

Crude oil for November delivery was at $81.63 a barrel, down 3 cents, at 11:36 a.m. Singapore time. On Sept. 28, the contract fell $1.22, or 1.5 percent, to close at $81.66 a barrel on the New York Mercantile Exchange.

“There may be profit-taking this week as there is little hurricane risk left,” said Yuichiro Sakaki, assistant vice president of commodity derivative sales at Mizuho Corporate Bank in Singapore.

Oil climbed as high as $83.76 a barrel on Sept. 28, approaching the record $83.90 reached on Sept. 20.

Tropical depression Melissa is moving at 14 miles per hour with sustained winds of 30 miles per hour, at 665 miles west of the Cape Verde Islands in the Gulf of Mexico, the U.S. National Hurricane Center said in the latest public advisory about the storm on its Web site. It is predicted to dissipate in the next 24 hours.

Systems are designated tropical storms, and are named, when their sustained winds reach 39 miles per hour. They become hurricanes when the winds reach 74 miles per hour.

Weaker Dollar

Oil’s decline was limited as a weaker U.S. dollar prompts a switch to commodities as alternative investments to hedge against inflation.

A decline in the dollar also made it cheaper for investors to buy oil when they pay in their domestic currencies.

“The U.S. dollar is one factor providing some support to oil prices,” Mizuho’s Sakaki said.

The dollar traded near an all-time low against the euro on speculation a U.S. report today will show factories expanded at the slowest pace in six months. The dollar traded at $1.4261 against the euro, compared with $1.4267 on Sept. 28 and a record low of $1.4283.

Oil and gas companies including BP Plc, Royal Dutch Shell Plc and Exxon Mobil Corp., the world’s largest oil company, shuttered wells and evacuated personnel in September as storm clouds passed over Florida and formed a tropical depression in the eastern Gulf.

Hurricane Lorenzo, the 12th named system of the Atlantic hurricane season, weakened to a tropical depression as it moved over eastern Mexico, dumping torrential rains that may produce life-threatening flash floods and mudslides, the U.S. National Hurricane Center said on Sept. 29.

Brent Prices

“Crude oil today may fall as low as $80.50,” said Ken Hasegawa, a manager of the international division at commodity futures broker Himawari CX Inc. in Tokyo. “Traders were placing to sell” contracts.

In London, Brent crude oil for November settlement was at $79.12 a barrel, down 5 cents, in electronic trading on the ICE Futures exchange at 12:58 p.m. Singapore time. It fell 86 cents, or 1.1 percent, to $79.17 on Sept. 28. Prices ended at $80.03 a barrel on Sept. 27, the highest close since the introduction in 1989.

U.S. Inventories

“Product demand may be weak if oil prices remain at these high levels and the U.S. crude inventories could continue to build this week,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo.

U.S. crude oil inventories rose 1.84 million barrels, the Energy Department said in a report on Sept. 26. The gain left supplies 8.5 percent higher than the five-year average for the period, the department said.

Stockpiles at Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is delivered, dropped 209,000 barrels, the report showed.

“Crude inventories could be drawn down pretty quickly in the winter months but there are concerns that the U.S. economy is weakening and high oil prices could lower product demand,” Mitsubishi’s Nunan said.

To contact the reporters on this story: Sophie Tan in Singapore at [email protected] ; Megumi Yamanaka in Tokyo at [email protected]

Last Updated: October 1, 2007 01:03 EDT

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