Oil Falls as Tropical Storm Ida Weakens in Gulf, Dollar Gains

By Christian Schmollinger

Nov. 10 (Bloomberg) -- Crude oil fell in New York after Tropical Storm Ida weakened in the Gulf of Mexico as it headed for the U.S. Gulf coast, reducing the potential of further supply disruptions.

Ida’s sustained winds have dropped to 60 miles (97 kilometers) per hour from 65 mph earlier, the National Hurricane Center said on its Web site. Producers have begun preparations to resume operations. Oil also declined as the dollar rebounded from a two-week low against the euro, reducing the appeal of commodity as an inflation hedge.

“Most people feel that the storm isn’t going to be that severe,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “This is the last hurrah for the hurricane season.”

Oil for December delivery declined as much as 86 cents, or 1.1 percent, to $78.57 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.62 a barrel at 3:54 p.m. Singapore time. Yesterday, the contract rose $2, or 2.6 percent, to $79.43. Prices have gained 76 percent this year.

Ida was centered 100 miles south-southwest of Mobile, Alabama, at 9 p.m. local time and was moving north at 13 mph, the center said. Workers were evacuated in the Gulf of Mexico and companies idled 29.6 percent of oil and 27.5 percent of natural gas output, according to government data.

Marathon Oil Corp. said it may start work on bringing output back tomorrow. The company had evacuated and shut in production at a platform located at Ewing Bank 873, which can produce the equivalent of about 12,000 barrels of oil a day, Lee Warren, a company spokesman, said in an e-mail.

U.S. Stockpiles

The dollar climbed on prospects investors reduced short positions on the currency before a U.S. public holiday tomorrow. The greenback traded at $1.4991 per euro as of 3:16 p.m. in Singapore from $1.4999 in New York yesterday, when it touched $1.5020, the lowest since Oct. 26.

U.S. crude-oil inventories probably rose 1 million barrels in the week ended Nov. 6, according to the median of 10 estimates by analysts before an Energy Department report.

Supplies of distillate fuel, a category that includes heating oil and diesel, declined 700,000 barrels from 167.4 million the prior week, according to the survey. Gasoline stockpiles probably dropped 400,000 barrels from 208.3 million in the week before, the survey showed.

The department is scheduled to release its weekly report on Nov. 12 at 11 a.m. in Washington, a day later than usual because of the Veterans’ Day holiday on Nov. 11.

Brent crude for December settlement fell as much as 87 cents, or 1.1 percent, to $76.90 on the London-based ICE Futures Europe exchange. It was at $77.08 a barrel at 3:58 p.m. Singapore time. Prices rose $1.90, or 2.5 percent, to $77.77 a barrel yesterday.

World Reserves

World oil reserves are more depleted than official estimates state, the Guardian reported, citing a whistleblower at the International Energy Agency.

The IEA has been underplaying a future oil shortage while overplaying the chances of finding new reserves under pressure from the U.S. amid a fear of triggering panic buying, the newspaper reported, citing an unidentified senior official at the IEA.

Peak oil critics have often wrongly questioned the accuracy of its figures, the IEA said last night, ahead of the publication of its World Energy Outlook report today, the newspaper said.

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