Oil Slides $1 as Hurricane Fears Subside
NEW YORK – Crude oil prices slumped more than $1 Friday as dealers bet that Hurricane Katrina (search) would miss the heart of oil and gas production in the Gulf of Mexico, home to a quarter of U.S. domestic output.
U.S. light crude settled down $1.36 at $66.13 a barrel, pulling it back from its record $68 hit Thursday on the New York Mercantile Exchange (search). London Brent crude was down $1.40 at $64.87 a barrel on the International Petroleum Exchange.
Six oil companies operating in the Gulf of Mexico (search) said they evacuated workers from their offshore platforms as a precaution against Katrina, which crossed sorida Thursday night from the Atlantic Ocean and entered the Gulf.
But only one company, Total of France, reported any impact to production. Total said it shut 16,500 barrels per day of crude oil output, accounting for only a fraction of the region's 1.5 million bpd capacity.
"In the last two days people had taken some long positions and traders were looking for more extension on the storm, and when it failed to materialize at the end of the day, they exited their positions," said Mike Fitzpatrick, vice president, energy risk management at Fimat USA.
So far this year, the effects of tropical storms and hurricanes have cut more than 6 million barrels of U.S. crude oil production and more than 28 billion cubic feet of gas production.
The National Hurricane Center (search) showed Katrina missing key offshore producing fields off the coast of Alabama and Mississippi before making landfall again on the Florida Panhandle Monday. Other forecasters said the storm could venture farther west.
Despite record oil prices, the U.S. economy is proving relatively resilient to an oil price rally that has more than doubled the cost of crude since 2003.
"... the flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for crude oil and natural gas that we have experienced over the past two years," Federal Reserve Chairman Alan Greenspan (search) said in remarks Friday.
Oil dealers also focused on Nigeria, where fuel price rises issued Friday could lead to general strikes, as has happened previously.
Blue-collar union NUPENG said Thursday it would not halt oil sales from the world's eighth biggest exporter, if it joins any general strike called to protest the price increase.
Lofty oil prices, averaging over $54 a barrel this year, are sparking some concern over economic growth as governments, businesses and consumers start to feel the pinch of high fuel bills.
With no end in sight to a rally that has pushed oil toward an inflation-adjusted $82 reached in 1980, the year after the Iranian revolution, some European and Asian governments are urging consumers to conserve fuel.
French Industry Minister Francois Loos said Friday the price of oil was likely to remain high "for a long time" and called on consumers to improve efforts to save energy.
German Chancellor Gerhard Schroeder said record oil prices were hurting the German economy and crimping consumer spending.
"It's clear that high (gasoline) prices are a burden for consumers and the economy," Schroeder said in an interview with Motorwelt, the magazine of German motoring club ADAC.