Oil Prices Slide as Hurricane Fears Subside

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Oil Prices Slide as Hurricane Fears Subside

After battering the island of Jamaica on Sunday, Hurricane Dean spared the Cayman Islands yesterday as it headed for Mexico's Caribbean coast. The Category 4 storm is unlikely to hit oil production and refining centers in the Gulf of Mexico, according to forecasters, easing market fears of another supply disruption.

On the news, U.S. crude fell 56 cents to $71.42 a barrel, cancelling out most of the 98-cent rise that occurred last Friday when Dean was heading toward the Gulf. Oil prices rose Friday after the Federal Reserve's move to cut its discount lending rate by a half-percentage-point boosted the stock market which had been hammered by the credit market squeeze. Oil investors sold to cover heavy losses in financial markets, knocking U.S. crude prices down nearly 10 percent from a record high on Aug. 1.

The U.S. National Hurricane Center said Hurricane Dean could grow into a monstrous Category 5 hurricane before slashing across the Yucatan Peninsula and emerging in the oil-rich Gulf of Campeche. The storm's center was expected to hit central Mexico, but the Hurricane Center said Dean would remain south of the U.S. portion of the Gulf, which accounts for about a third of U.S. oil production. Nevertheless, south Texas likely to be lashed by gusty winds and rain.

"Barring a sudden northerly veering of the track of the storm, Gulf of Mexico production should be materially unaffected," according to a research note by Citigroup analysts, who added that the operations of Mexico's state oil company, Pemex, in the Bay of Campeche were vulnerable.

Computer models point Dean away from the paths taken by 2005's devastating hurricanes Katrina and Rita through offshore oil production areas and onshore refining centers.

Still, companies with operations from the central to western Gulf are taking no chances and continued pulling support workers who were not essential to keeping offshore production running.

The U.S. Minerals Management Service said on Saturday that 10,300 barrels per day out of 1.3 million barrels in Gulf of Mexico oil production was shut in due to the threat of Hurricane Dean, according to Reuters.
About 16 million cubic feet out of 7.7 billion cubic feet of daily natural gas output in the Gulf of Mexico has been shut, said the agency, which oversees offshore energy production.

So far, one production platform and two drilling rigs have been evacuated due to the storm, according to Reuters.

Oil majors ExxonMobil, Shell Oil and ConocoPhillips said they were evacuating workers on Saturday. Exxon said production was not cut on Saturday as it pulled nonessential workers from the Gulf. Shell said 300 support workers were being taken away from the Gulf Saturday.
Shell said it has shut in daily production of 10,000 barrels of oil and 15 million cubic feet of natural gas.

ConocoPhillips was evacuating nonessential workers from the Magnolia platform on Saturday. The company did not expect Dean to affect onshore production in southeast Louisiana. The Magnolia platform is about 165 miles south of the central Louisiana coast and can handle 50,000 barrels per day in oil and 150,000 cubic feet of daily natural gas output.

Transocean, a big driller, said staff on its drilling rigs had been reduced by about 360 people in the last two days. Two of the company's rigs in the western Gulf were to be evacuated by Monday, Transocean said.
BP planned to take workers from offshore platforms throughout the weekend and Murphy Oil also said workers were being evacuated.

-- From combined news reports