Oil Is Steady as U.S. Demand May Slow, Storm Approaches Gulf

By Gavin Evans

Aug. 18 (Bloomberg) -- Crude oil was little changed in New York amid speculation slowing economic growth in the U.S. will trim demand for fuels. Declines were limited as a storm in the Gulf of Mexico prompted evacuations from production platforms.

A report tomorrow will probably show home building in the U.S., the world's largest oil consumer, fell to the lowest pace in 17 years in July amid rising borrowing costs and record foreclosures. Tropical Storm Fay approached Cuba, nearing a region that is home to more than a fifth of U.S. oil output.

``Even really bullish news can't turn this market up right now,'' Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut, said in an interview with Bloomberg Television. ``It's all about the dollar and that's what's pushing prices lower.''

Crude oil for September delivery fell as much as 52 cents, or 0.5 percent, to $113.25 a barrel on the New York Mercantile Exchange. It was at $113.74 at 9:14 a.m. Sydney time.

The contract fell $1.24, or 1.1 percent, to settle at $113.77 on Aug. 15. Earlier in the session it touched $111.34, a 15-week-low, as the dollar rose for a fifth week against the euro and the Organization of Petroleum Exporting Countries warned of risks to world demand from the slowing global economy.

Oil and metal prices have fallen the past month as the rising U.S. dollar reduced the attraction of investing in commodities.

Housing, Sentiment

A weak housing report will reinforce investor expectations of slowing demand, while a strong number may bring forward the prospect of a rate-rise by the Federal Reserve, further supporting the dollar, Beutel said.

``Everything seems to have a bearish lining to it,'' he said.

The dollar rose 2.2 percent against the euro last week. It was at $1.4694 in early Asian trading, from $1.4687 late in New York last week.

Brent crude for October settlement fell 25 cents, or 0.2 percent, to $112.30 a barrel on London's ICE Futures Europe exchange.

Tropical Storm Fay, with maximum sustained winds of about 50 miles (80 kilometers) an hour, was centered 205 miles southeast of Havana at 5 p.m. New York time and may strengthen to a hurricane before striking Florida's western coast Aug. 19, the National Hurricane Center said.

Oil prices are unlikely to react unless Fay veers west toward Louisiana, Beutel said. Even then, prices may struggle to hold any gains unless there is actual disruption to production.

Royal Dutch Shell Plc evacuated about 360 non-essential staff from the eastern Gulf the past two days. Production hasn't been affected. Transocean Inc., the world's largest offshore oil driller, said it evacuated 130 workers and suspended operations at several rigs in the Gulf as a precaution because of the storm.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net