Oil tumbles below $109 as Gustav concerns recede
Oil plunged almost $3 a barrel on Tuesday to its lowest since mid-April, extending the previous day's rout on initial signs that a weakened Hurricane Gustav spared major Gulf oil facilities.
Oil hovers at $102Early checks by some U.S. refiners reported no damage from Gustav, which weakened to Category 2 before roaring ashore near Port Fourchon, Louisiana, on Monday. At least two others were expected to dip into the U.S. Strategic Petroleum Reserve, helping ensure steady gasoline and diesel supplies.
U.S. crude fell to $108.55 a barrel by 0647 GMT (7:47 a.m. BST), extending Monday's $4 slide to stand almost $3 below trading levels late on Monday and down almost $7 from Friday's close as traders discounted Gustav, which had been called the biggest threat to the sector since 2005's devastation.
Because of the U.S. public holiday a day ago, the New York Mercantile Exchange did not issue any official settlement prices.
London Brent crude fell $1.86 or 1.7 percent to $107.55.
With Gustav now just a tropical storm as it churns further inland, energy companies were starting to assess the potential damage as they looked to restart the 1.3 million barrels per day of offshore oil production and over 2.1 million bpd of refining throughput that was shut ahead of the storm.
But some oil traders are already looking past the storm toward more bearish factors such as the rising dollar and weakening demand, hopeful that operators were better prepared than in 2005, when Katrina and Rita wrecked more than 100 offshore platforms in 2005 and shut several refineries for months.
"There is another month of peak hurricane season to go, and there will be other threats," Michael Wittner, global head of oil research at Societe Generale, said in a research note.
"However, the market reaction to Gustav has confirmed our opinion that when the disruption threats fade, the underlying factors are bearish," he said.
The Gulf is home to a quarter of U.S. oil output and more than a third of U.S. refining capacity.
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