Oil Little Changed as Tropical Storm Fay Nears Gulf of Mexico

By Christian Schmollinger and Grant Smith
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Aug. 18 (Bloomberg) -- Crude oil traded little changed as a storm near Cuba prompted evacuations from rigs and platforms in the Gulf of Mexico, which accounts for about a fifth of U.S. production.

Royal Dutch Shell Plc and Transocean Inc. have evacuated workers as Tropical Storm Fay, with maximum sustained winds of almost 60 miles (100 kilometers) an hour, may strengthen to a hurricane before striking Florida's northwestern coast today, the National Hurricane Center said. Crude oil in New York fell to a 15-week low on Aug. 15, its second consecutive weekly decline.

Crude oil for September delivery was at $113.54 a barrel, 23 cents lower on the New York Mercantile Exchange at 1:32 p.m. in London. It earlier gained as much as $1.58, or 1.4 percent, to $115.35.

``After oil plumbed new lows at the end of last week, Storm Fay caused a recovery in prices,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``Much depends on how it develops and whether it threatens U.S. production or refineries.''

Prices have declined 22 percent from the record $147.27 a barrel reached on July 11 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.

Azeri Shipments

Disruption to exports from Azerbaijan, third-largest producer in the former Soviet Union, because of an Aug. 5 pipeline explosion in Turkey and fighting in Georgia have failed to stem the decline in prices.

Turkey expects the Baku-Tbilisi-Ceyhan oil pipeline to open in ``a few days'' after repairs on the fire-damaged route are complete, Energy Minister Hilmi Guler said today. The BTC pipeline has a capacity of about 1 million barrels a day.

Russia said it will begin pulling its troops out of Georgian territory today after the U.S. and other Western countries pressed President Dmitry Medvedev to honor a cease- fire deal he signed two days ago.

Brent crude for October settlement rose as much as $1.60, or 1.4 percent, to $114.15 a barrel on London's ICE Futures Europe exchange. It was at $112.39 a barrel at 1:32 p.m. London time.

Storms routinely disrupt tanker traffic and production in the region in the North Atlantic hurricane season running June through November. In 2005, Hurricane Katrina wrecked platforms and refineries around New Orleans, prompting an international release of fuel from reserve stockpiles.

Fay Over Cuba

Shell evacuated about 360 non-essential staff from the eastern Gulf the past two days. Production hasn't been affected. Transocean, 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.

Shortly before 8 a.m. Miami time, Fay was over the northern coast of western Cuba, about 80 miles east of Havana and 100 miles south-southeast of Key West, Florida, according to an advisory on the National Hurricane Center's Web site. The storm was moving north-northwest at 12 miles an hour, the center said.

Hedge-fund managers and other large speculators increased their net-short position in New York crude-oil futures in the week ended Aug. 12, according to U.S. Commodity Futures Trading Commission data.

Speculative short positions, or bets prices will fall, outnumbered long positions by 9,130 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-short positions rose by 3,580 contracts, or 65 percent, from a week earlier.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net