Oil Prices Slip Below $60 Per Barrel ($59.63/bbl)

Associated Press ^ | July 8, 2005 | BRAD FOSS

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WASHINGTON - Oil prices fell below $60 a barrel on Friday, reversing course late in the day as traders booked profits following a runup predicated on the fear of hurricane-related supply disruptions.

Early on, crude futures prices rose as high as $61.90 per barrel on the New York Mercantile Exchange, with traders shrugging off the shock of the London bomb blasts and focusing instead on Hurricane Dennis' approach in the Gulf of Mexico. Traders fear a repeat of last year's Hurricane Ivan, which damaged oil platforms and resulted in months of lost production in the region.

But the rally lost steam amid speculation that the power of Dennis might not be as intense as originally feared, leading traders to take some chips off the table.

"People got scared heading into the weekend," said oil broker Mike Fitzpatrick at Fimat USA in New York. "I wish I could give you a better explanation."

Light, sweet crude for August delivery dropped by $1.18 to $59.55 per barrel in late afternoon trading on Nymex.

Unleaded gasoline futures declined by less than a penny to $1.798 a gallon, while heating oil futures slid 3.49 cents to $1.74 a gallon.

Oil analyst Scott Meyers at Pioneer Futures Inc. in New York said "what remains to be seen is how much damage is caused" by Hurricane Dennis, which gained strength while barreling through the Caribbean toward the Gulf of Mexico. Forecasters warned residents from Florida to Louisiana to be ready this weekend.

"If nothing happens, we might come in Monday to see a significant selloff," Meyers said. "It's speculation at its finest."

But Meyers said any reprieve would likely be temporary, since the hurricane season just got started and any threat to supply is going to keep traders on edge.

While there is enough oil and gasoline on the market to meet demand, oil analysts expect demand to rise throughout the second half of the year and they are concerned about the ability of oil producers and refiners to keep up.

The Group of Eight industrialized nations, which met Friday in Scotland, said that surging oil prices posed a risk for the world economy. Russian President Vladimir Putin said his country would work to boost exports in an effort to east market tightness, but he gave no timeline for the increase.

Global oil demand is expected to average more than 84 million barrels per day this year, leaving an estimated 1.5 million barrels per day in excess production capacity that can be tapped in the event of a supply disruption.

"We can't afford to have any outages anywhere, whether it's a political situation in a petroleum supplying nation or whether it's a hurricane in the Gulf of Mexico," said oil broker Tom Bentz, at BNP Paribas Commodity Futures in New York. "This is what everyone's been worried about all along."

The Organization of Petroleum Exporting Countries, whose output is estimated to be roughly 30 million barrels per day, has been unsuccessful in its attempts to cool the red-hot energy market by boosting its production quota.

On Friday, OPEC president Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait's energy minister, told reporters he would talk this weekend with other cartel members about possibly increasing production in an effort to lower prices.

Immediately after the blasts in London on Thursday, oil dropped from above $62 to near $57 a barrel — what Vienna's PVM Oil Associates said was the largest price swing since the 1991 Gulf War — on concern the economy would be hurt by a decline in tourism. But prices recovered to close at $60.73, down 55 cents.

Power outages caused by Tropical Storm Cindy on Wednesday disrupted a minor amount of oil production and refining operations in the Gulf of Mexico and sent oil prices to a settlement record of $61.28 a barrel.

In the wake of Hurricane Ivan last year, 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.

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.

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7/08/05 Session Contract Detail for August 2005

	Open High				61.60
	Open Low				61.40
	High				61.90
	Low				59.50
	Settle				59.63
	Change				-1.65
	Open Interest				192495
	Volume				0
	Last Updated				7/08/05 14:54:47

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Call me when it drops below 50 then I might give a s....