Oil Nears 8-Week Lows on Economic Slowdown Concerns
Oil prices hovered near eight-week lows Thursday as traders tried to decide if the risk of an economic slump dampening demand is bigger than potential threats to supplies.
The energy markets have fallen in recent weeks despite approaching storms, with many investors betting that credit might be tightening so much as to stifle growth. Also pressuring prices, the summer--peak driving and air-conditioning season--is ending, and the winter looks like it could be a mild one.
Crude is down more than 3 percent since last Friday, gasoline is down 6.8 percent, and natural gas is down 20 percent.
"There are some concerns about forward demand for the next few weeks, next few months," said Antoine Halff, head of energy research at Fimat USA. "There are forecasts of mild temperatures from September to November, which would mean the winter heating season will have a late start. Risks of a slowdown in the U.S. economy could also hurt demand."
At this point, the energy market appears to be in wait-and-see mode, assessing if the economy is really halting or if worries are overblown.
Natural gas storage is extremely high, which sets the stage for price drops similar to those last year, Halff said.
But supplies of crude oil and gasoline are much tighter, and gasoline demand, despite all of the market's jitters about the consumer, was at an all-time high last week, according to Energy Department data. So if another Atlantic hurricane does veer toward the U.S. oil facilities scattered along the Gulf Coast, the investors that took their money out of the energy markets to make up for losses elsewhere might feel inclined to put it back in _ which could eventually mean higher gasoline prices for consumers.
Light, sweet crude for October delivery rose on the New York Mercantile Exchange.
September gasoline rose 1.1 cents to $1.90 a gallon.
Natural gas futures--which had fallen 20 percent just this week to an 11-month low--edged down 0.1 cent to $5.577 per 1,000 cubic feet.
The Energy Department reported that natural gas in U.S. storage rose last week by 23 billion cubic feet to 2.93 trillion cubic feet, about 13 percent above the five-year average for this time of year.
The gasoline supply outlook is less rosy. On Wednesday, the Energy Department said gasoline supplies fell by 5.7 million barrels, nearly 3 percent, to 196.2 million barrels. That's below the lower end of the average range for this time of year.
Hurricane Dean--which was recently downgraded to a tropical storm--hit the Mexican mainland for a second time Wednesday after striking oil platforms in the Gulf and forcing thousands to flee. Dean made landfall near the port of Tecolutla in Veracruz state on the central Gulf coast as a Category 2 hurricane with maximum sustained winds reaching 100 mph. It soon weakened to Category 1 status again, though, and its winds fell to 85 mph.
There had been some concern earlier that Dean, then a Category 5, could severely damage oil infrastructure in the main production area of Mexico's state oil company, Petroleos de Mexico, or Pemex. But Pemex said Wednesday there was no known damage to any production facilities. Thursday, Vienna's PVM Oil Associates reported that the company "plans to resume 80 percent of normal oil and gas production by early next week, and full production later in the week."
Mexico was the third-largest oil supplier to the United States in June, according to the Energy Department.
In other Nymex trading, September heating oil rose 1.13 cents to $1.9596 a gallon.
In London, October Brent crude rose on the ICE Futures exchange.