LONDON – Oil futures prices fell Thursday after a string of rush-hour blasts in London, an increase in U.S. heating oil supplies and as traders took profits from previous runups. But prices remained above $60 a barrel as a hurricane headed toward the Gulf of Mexico, threatening oil production and refining in the region.
Three near simultaneous explosions hit the London subway and one tore open a packed double-decker bus during the morning rush hour Thursday. The blasts killed more than 30 people and injured more than 300 in what a shaken Prime Minister Tony Blair (search) called a series of "barbaric" terrorist attacks.
Fears of an economic slowdown, particularly in tourism, caused oil prices to plummet by nearly $5 from its intraday high above $62 to $57.20 a barrel in electronic trade immediately after the attacks. But as analysts digested the incident's probable impact, August light sweet crude futures recovered to finish the day at $60.73, a decline of 55 cents.
Heating oil futures slipped by 1.99 cent to settle at $1.7749 per gallon on Nymex, where gasoline futures rose 1.57 cent to settle at $1.8056 a gallon.
At London's International Petroleum Exchange, August Brent futures dropped 57 cents to settle at $59.30 a barrel.
"There are concerns that terrorism could impinge on demand" by hurting the fuel-dependent airline industry, said oil analyst Marshall Steeves of New York-based brokerage Refco.
But Steeves said he does not anticipate a significant dropoff in jet fuel consumption as a result of the attacks in London. In fact, he believes the longer-term trend for global oil demand — and prices — is higher.
He said oil prices declined Thursday in part because of new data from the U.S. government that showed a huge build in the nation's supply of distillate fuel, which includes heating oil, jet fuel and diesel.
The weekly report from the Energy Department (search) also showed a large decline in domestic crude oil inventories, which may have kept prices from falling further. Concerns about an approaching hurricane also supported oil prices.
Forecasters at the National Hurricane Center (search) in Miami cautioned all Gulf Coast residents from Louisiana to Florida to pay attention as Hurricane Dennis (search), still hundreds of miles southeast of Miami, strengthened its winds to 110 mph Thursday, 1 mph shy of becoming a major hurricane.
"The projected path, for what it's worth, is that it's headed right smack at the oil and gas production in the Gulf," Steeves said.
On Wednesday, power outages caused by Tropical Storm Cindy disrupted a minor amount of oil production and refining operations in the Gulf of Mexico and sent oil prices to a settlement record above $61 a barrel.
Traders fear a repeat of last year's Hurricane Ivan (search), which damaged oil platforms in the Gulf of Mexico and caused others to shut down for months. Almost 44 million barrels of oil production were lost between September 2004 and February 2005, while natural gas output declined over the same period by 172 billion cubic feet.
Commodities analyst Frederic Lasserre at Paris-based SG Securities said he expected the events in London to temporarily depress oil prices but that the market's concerns about hurricane season and the tight supply-demand balance would once again be the major focus.
The U.S. Energy Department's latest petroleum snapshot showed a 3.6 million barrel decline in oil inventories last week, leaving supplies at 324.9 million barrels, or 7 percent above year ago levels.
Gasoline inventories shrank by 900,000 barrels to 215.3 million barrels, or 3 percent above year ago levels. The domestic supply of distillate fuel grew by 4 million barrels to 117.2 million barrels, or 3 percent above last year.
Crude oil futures are about 55 percent above year ago levels, though still below the inflation-adjusted high above $90 a barrel reached in 1980.