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Oil prices rally on Hurricane Dolly alert

Times Online
July 22, 2008

Oil prices rally on Hurricane Dolly alert

The price of oil spiked as offshore oil producers in the Gulf of Mexico began to gear up for the first major storm of this year’s hurricane season, forecast to hit Texas on Wednesday.

Fears that Hurricane Dolly may disrupt oil production triggered a rise in the cost of a barrel of oil with US crude up $2.16 to $131.04, having fallen back from more than $147 last week. In London, brent crude jumped $2.42 to $132.61.

While the US Energy Information Administration said that on its current path, Hurricane Dolly was likely to miss major oil producing areas, it warned that it could threaten some coastal refineries later in the week.

Royal Dutch Shell, whose offshore platforms are to the west of the Gulf, near Texas, began evacuating workers back to the mainland as a safety precaution. On Sunday, it removed 125 people from its platforms, and said that it planned to evacuate another 60 today, but reassured the market that production was not affected.

The evacuation of oil platform workers does not necessarily signal a fall in production because platforms can be operated remotely.

However, in 2005, hurricanes Katrina and Rita devastated the oil production region, and temporarily knocked out a quarter of American crude and fuel production, destabilising platforms and driving up the cost of oil.

The hurricane season runs from June 1 to November 30, with the period between August and September particularly high risk. The Gulf of Mexico is extremely important to US oil production, providing Americans with a quarter of all their crude supplies. In addition, around 15 per cent of US gas supply is derived from the Gulf.

BP, which has eight platforms to the west of the Gulf near Louisiana and Alabama and a number of rigs and vessels, said that it was “keeping an eye on the sky”.

The US National Hurricane Centre said that it had recorded winds of almost 50 miles per hour, as the storm gathered pace from the Yucatan Peninsula across the gulf. The centre issued a hurricane watch for the southern Texas coast, a major refining area.

Exxon Mobil said it was preparing for heavy weather across its Gulf and South Texas operations. Other oil and natural gas companies including ConocoPhillips, Chevron Corp, Marathon Oil Corp and Petrobras said they were monitoring the storm’s progress.

Oil prices also were supported by geopolitical tensions with Iran, the world’s fourth-largest crude oil producer, after the nuclear talks in Geneva made no progress.

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