Oil Declines From One-Week High on Isaac, G-7 Statement
Oil fell from its highest closing price in a week and gasoline declined for a second day after Hurricane Isaac made landfall in the U.S. and the Group of Seven nations said prices may threaten the global economic recovery.
Crude futures slipped as much as 0.9 percent, then pared some its loss after the U.S. economy expanded more than estimated in the second quarter. Gasoline dropped by 1.3 percent after Isaac struck the coast of southeastern Louisiana. A shutdown of refineries because of the storm has curbed crude demand, according to Goldman Sachs Group Inc. The G-7 called on oil-producing countries to increase output, according to a joint statement issued yesterday by the U.S. Treasury Department.
“The information we have on Isaac as of now suggests it has not been as destructive as the market had perhaps feared,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG (RBI) in Vienna, who predicts crude prices will remain near current levels this month. “The focus is on when the majority of production will resume and whether or not there will be any serious damage to the infrastructure.”
Oil for October delivery declined as much as 89 cents to $95.44 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.92 at 1:49 p.m. London time. The contract yesterday climbed 0.9 percent to $96.33, the highest close since Aug. 22. Prices are 2.7 percent lower this year.
Brent oil for October settlement was little changed at $112.64 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was $16.66, compared with $16.25 yesterday.
U.S. gross domestic product climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent, revised Commerce Department figures showed today in Washington. The figure matched the median estimate in a Bloomberg survey. The revised data showed companies invested in new equipment at the slowest pace in almost three years.
Gasoline extended yesterday’s decline after Venezuela extinguished a fire at its biggest refinery. State-owned Petroleos de Venezuela SA will wait at least 24 hours before resuming the 645,000 barrel-a-day Amuay refinery, Oil Minister Rafael Ramirez told reporters yesterday in Falcon state near the plant. A gas explosion on Aug. 25 and the subsequent four-day blaze shut the plant and killed 48 people.
Gasoline for September delivery was at $3.0955 a gallon, down 3.06 cents, on the New York Mercantile Exchange. The contract slid 0.9 percent yesterday after rising as high as $3.205 on Aug. 27, the highest level since April 30, amid concern the Venezuelan fire and Isaac would curb supplies.
Retail prices for regular grade increased 1.3 percent to $3.804 a gallon yesterday, the highest level since April 30, according to AAA, the largest U.S. motoring group.
Oil in New York may extend its decline to as low as $94.55 a barrel, along the bottom of a short-term uptrend channel on the daily chart, according to data compiled by Bloomberg. This channel started from the June 28 fall to $77.28, the 2012 intraday low. Buy orders tend to be clustered near technical- support levels.
Companies halted 93 percent of oil production in the Gulf of Mexico and 67 percent of natural-gas output as Isaac neared the Louisiana coast, the Bureau of Safety and Environmental Enforcement said. Six Louisiana refineries were shut and three were running at reduced rates, idling 6.7 percent of U.S. capacity, according to data compiled by Bloomberg.
Category 1 Hurricane
“Markets were already pricing in what was proving to be a disruptive storm,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong. “The market is focusing on the comments from governments. The comments highlight that policy makers are getting concerned about how high oil prices are.”
Isaac was 20 miles (30 kilometers) southeast of Houma, Louisiana, and 50 miles south-southwest of New Orleans, the National Hurricane Center said in a report published on its website at 6:56 a.m. New York time. The system’s maximum sustained winds were 80 miles per hour, making it a Category 1 hurricane, the center said.
“While production and imports might continue to be impacted for a couple more days after the hurricane has passed, crude demand has also been impacted,” Stefan Wieler, an analyst at Goldman in New York, said in a note e-mailed today. “The greater concern lies in the risk to refining capacity.”
The G-7 said in its statement that it’s prepared to call upon the International Energy Agency, a 28-member group of oil- consuming countries, “to take appropriate action to ensure that the market is fully and timely supplied.” The IEA’s countries made available 60 million barrels of crude and oil products in June 2011 after Libyan output was disrupted by an armed uprising against Muammar Qaddafi.
Oil also fell after the American Petroleum Institute said U.S. crude stockpiles gained 5.5 million barrels last week. An Energy Department report today at 10:30 a.m. in Washington may show inventories slid 1.75 million barrels, according to a Bloomberg News survey.
The Labor Day holiday on Sept. 3 marks the end of the U.S. summer driving season, the peak gasoline demand period. Refiners often idle processing units for maintenance in September and October as consumption of the motor fuel drops and before heating-oil use increases.
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