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Oil Is Steady as U.S. Output Resumes, OPEC to Keep Production

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Oil Is Steady as U.S. Output Resumes, OPEC to Keep Production 

By Nesa Subrahmaniyan

Sept. 4 (Bloomberg) — Crude oil was little changed near $109 a barrel following declines in the past four days as some U.S. Gulf Coast production resumed after Hurricane Gustav swept through the area this week.

The Louisiana Offshore Oil Port, the biggest U.S. oil- import terminal, may restart deliveries today after shutting ahead of the hurricane, said Barb Hestermann, a port spokeswoman. OPEC, the supplier of 40 percent of the world’s oil, will maintain output at its Sept. 9 meeting, according to 29 of 32 energy analysts surveyed by Bloomberg.

“There’s a lot of downward pressure in the market, and sentiment is subdued because of demand erosion,” said Tobias Merath, a commodity analyst at Credit Suisse Group in Singapore. “OPEC is producing at record levels and there are more risks to the downside than the upside right now. U.S. crude supplies may also show an increase.”

Crude oil for October delivery traded at $109.11 a barrel, down 24 cents, at 3:16 p.m. Singapore time on the New York Mercantile Exchange. Yesterday, oil fell 36 cents, or 0.3 percent, to settle at $109.35 a barrel. Prices have declined 26 percent from the record $147.27 reached on July 11.

Royal Dutch Shell Plc and ConocoPhillips said yesterday that Hurricane Gustav caused no damage to platforms in the Gulf of Mexico. Exxon Mobil Corp. workers are returning to production facilities, according to the company.

Price declines were limited in yesterday’s trading session on forecasts that more tropical storms were forming in the Atlantic.

Hanna, Ike, Josephine

Tropical Storm Hanna expanded as it lashed Haiti and the Bahamas with torrential rains, laying a course that forecasters say may take it away from the Gulf and toward South Carolina as a hurricane by the end of the week, the U.S.National Hurricane Center said as of 11 p.m. Miami time.

Farther out to sea, Hurricane Ike’s winds strengthened to 70 miles (113 kilometers) per hour. Tropical Storm Josephine in eastern Atlantic Ocean, packed winds of about 60 mph that are forecast to weaken later this week, the center said.

Anadarko Petroleum Corp. restarted production at its Nansen and Boomvang platforms in the Gulf on Sept. 2 and is returning workers to offshore facilities that were outside the path of Gustav.

Resuming Output

Valero Energy Corp. and ConocoPhillips, the U.S.’s two biggest refiners, were focusing on restarting units that were shut in preparation of Gustav. Refineries haven’t reported serious damages to units from Gustav compared to Hurricanes Katrina and Rita in 2005.

“Refiners likely managed Gustav more efficiently than Katrina, so the storm damage to refining infrastructure will likely be lighter and more temporary than three years ago,” Antoine Halff, head of energy research at Newedge USA LLC in New York, said in a report late yesterday.

About 96 percent of crude-oil production in the Gulf and 92 percent of natural-gas output remains halted because of Gustav, the U.S. government said. Producers reported that 91 rigs and 599 platforms are evacuated due to the storm, the Minerals Management Service said yesterday on its Web site.

About 1.2 million barrels of daily oil production remain shut-in, along with 6.7 billion cubic feet of gas.

The Energy Department is scheduled to release its weekly report on Sept. 4 at 11 a.m. in Washington, a day later than usual because of the Labor Day holiday.

Supplies of crude oil probably rose 450,000 barrels in the week ended Aug. 29 from 305.8 million barrels the prior week, according to the median of responses by 14 analysts before an Energy Department report tomorrow. Eight expected an increase and six expected a drop.

Strategic Reserves

The dollar’s recovery will also cause the decline in oil prices to continue, Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said yesterday in a phone interview, adding that he expects supply to outstrip demand by as much as 1 million barrels a day in the first half of 2009.

Marathon Oil Corp. made a request for crude oil supplies from the U.S. Strategic Petroleum Reserve, the Energy Department said. The company needs the oil for its refineries in Robinson, Illinois, and Catlettsburg, Kentucky, Andrew Beck, the Energy Department’s chief spokesman, said in an e-mailed statement.

The oil is needed because of disruptions to supplies after Hurricane Gustavswept through the Gulf of Mexico, Beck said. The amount of oil requested by Marathon wasn’t specified in the statement.

The Robinson refinery can process 204,000 barrels of oil a day, and Catlettsburg has a refining capacity of 226,000 barrels a day, according to company data.

Citgo Petroleum Corp., owned by Venezuela’s state oil company, has withdrawn a request for 250,000 barrels to be supplied from the U.S. reserve, Beck said.

Brent crude oil for October settlement was at $107.84 a barrel, down 22 cents, on London’s ICE Futures Europe exchange at 3:17 p.m. Singapore time. Yesterday, prices closed down 28 cents, at $108.06 a barrel.

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at[email protected].

Last Updated: September 4, 2008 03:20 EDT

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