Oil Settles Above $121 as OPEC Amps Up Output
Oil fell to a three-month low Monday, pressured by evidence of rising OPEC output in the midst of declining demand in the United States and Europe.
The losses extended a steep slide from the mid-July peak above $147 a barrel and came despite a storm in the Gulf of Mexico that was curbing oil output, shipping and refining.
"Crude futures are down despite a brewing storm and that shows you how momentum has shifted in this market," said Phil Flynn, analyst at Alaron Trading in Chicago.
U.S. light crude fell $3.69 to settle at $121.41 a barrel on the New York Mercantile Exchange, after falling as low as $119.50, the lowest level since early May. London Brent fell $3.55 to $120.63.
The losses came after a Reuters survey showed OPEC supply rose for a third consecutive month in July mainly because of increased output from the world's top exporter Saudi Arabia.
The boost in production from OPEC comes as soaring energy prices and an economic slowdown cut into energy consumption in the United States and Europe.
The bearish impact was countered by Tropical Storm Edouard, which was barreling across a major oil and gas producing area of the northern Gulf of Mexico.
The storm affected shipping and port operations, triggered evacuations and minor production outages offshore, and forced at least one refinery along the coast to shut.
The storm was expected to come ashore at close to hurricane strength Tuesday on the Texas-Louisiana coast.
Traders also were nervous that supplies could be disrupted as a result of tension between the West and the world's fourth-largest oil producer, Iran.
"Despite all these bullish inferences a lower market must mean that participants have an infinitely greater concern about a deteriorating global economy," Mike Fitzpatrick, vice president at MF Global, said in a note.
The head of Iran's revolutionary guard was quoted as saying Iran could close the Straits of Hormuz, a key Gulf shipping route, if it were attacked over its nuclear program.
Mohammad Ali Jafari's comments followed a telephone meeting between Iran and representatives of six world powers about Tehran's nuclear program in which the Islamic Republic said it would press ahead in spite of a demand to halt the work.
Oil supplies already have been disrupted from Nigeria, the world's No. 8 oil exporter, as a result of militant attacks that have cut about a fifth of its production.
Gunmen kidnapped two French expatriates near the country's oil industry hub of Port Harcourt in the restive Niger delta, military and security sources said on Sunday.
High energy prices have been of concern in the United States, the world largest consumer of oil already battered by a housing and credit crisis.
U.S. presidential candidate Barack Obama called on Monday for swapping some of the oil in the country's Strategic Petroleum Reserve, a move his campaign said was aimed at lowering the price of gasoline.