Oil Is Steady as Storm Forecast to Miss Gulf Production Areas

By Christian Schmollinger

July 22 (Bloomberg) -- Crude oil traded little changed in New York as forecasters said a storm in the Gulf of Mexico will probably miss the main U.S. production areas, easing concern that supplies will be disrupted.

Tropical Storm Dolly is predicted to come ashore on July 23 near the Texas border with Mexico, south of the part of Gulf of Mexico that accounts for about 25 percent of U.S. oil output, the National Hurricane Center said. U.S. crude supplies probably dropped last week as near-record prices discouraged buying, according to a Bloomberg News survey.

``The market washes these events out pretty quickly so unless it really flares up into something serious the market will see through it,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne.

Crude oil for August delivery traded 1 cent lower at $131.03 a barrel at 3:10 p.m. in Singapore. Earlier today the contract fell as much as 77 cents, or 0.6 percent, to $130.27 a barrel on the New York Mercantile Exchange. Futures are up 74 percent from a year ago.

Yesterday, oil rose $2.16, or 1.7 percent, to settle at $131.04 a barrel. It was the first increase in five days. The August contract expires today. The more-active September futures declined 43 cents, or 0.3 percent, to $131.39 a barrel at 1:43 p.m. Singapore time.

Oil settled at $128.88 on July 18, the lowest close since June 5. Prices dropped 11 percent last week, the most in more than three years, on signs of slowing global economic growth and faltering U.S. fuel demand.

Dolly's Winds

Brent crude oil for September settlement fell as much as 71 cents, or 0.5 percent, to $131.90 a barrel on London's ICE Futures Europe exchange. It was at $132.55 a barrel at 3:08 p.m. Singapore time. The contract yesterday rose $2.42, or 1.9 percent, to settle at $132.61 a barrel. Prices climbed to a record $147.50 on July 11.

Dolly's tropical storm-force winds extend outward as far as 200 miles and the storm, moving toward the west near 17 miles per hour, is expected to gradually decrease forward moving speed, the hurricane center said. The center of the storm was about 435 miles (695 kilometers) southeast of Corpus Christi, Texas.

``There's a very strong shot that we can get back to $150,'' Jonathan Kornafel, Asia director at Hudson Capital Energy in Singapore, said in an interview with Bloomberg Television. ``We're really just one hurricane away.''

Exxon Evacuates

Exxon Mobil Corp., the world's biggest energy company, said it started evacuating workers from oil and gas wells in the Gulf of Mexico before Tropical Storm Dolly arrives. There has been minimal production impact for Exxon, the company said in a statement today.

Royal Dutch Shell Plc, Europe's biggest oil company, has started evacuation of personnel from oil platforms in the Gulf of Mexico because of the approaching storm. The company removed about 125 people from its operations in the western part of the Gulf July 20, and was planning to evacuate another 60 yesterday, it said in an e-mailed statement.

``No further evacuations are planned at this time after yesterday, and based on current information and forecast we do not expect any impact on Shell-operated production in the Gulf of Mexico,'' The Hague-based Shell said.

No oil or natural-gas production has been shut as a result of the approaching storm, the Minerals Management Service, part of the U.S. Interior Department, said yesterday.

Mexican Output

Petroleos Mexicanos, Mexico's state oil company, produces about 1.07 million barrels of oil a day in the Bay of Campeche, which is south of the projected track of the storm. Dolly isn't expected to reach company platforms after it enters the Gulf, Petroleos Mexicanos spokesman Javier Delgado Pena said in a telephone interview yesterday.

U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita shut refineries and platforms as they struck the Gulf of Mexico coast in August and September 2005. Katrina shut 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the hurricanes.

The North Atlantic hurricane season runs from June through November. September is historically the busiest month for storms and hurricanes.

U.S. oil inventories have fallen in seven of the past nine weekly government supply reports. Stockpiles rose 2.95 million barrels in the week ended July 11, the Energy Department said last week.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.