CVIENNA, Austria, AP – rude-oil futures fell Tuesday as fears eased over the threat of Tropical Storm Wilma, with the storm now expected to stay away from oil facilities in the U.S. Gulf of Mexico.
But the approach of the Northern Hemisphere winter was expected to keep a firm floor under prices, primarily because of heating oil demand in Europe and the United States.
Light, sweet crude for November delivery slipped 72 cents to $63.64 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange.
Brent crude futures for December delivery fell 49 cents to $60.08 a barrel on London”s International Petroleum Exchange.
Heating oil fell 2 cents to $1.9625 a gallon, while gasoline slipped 3.5 cents to $1.7800 a gallon. Natural gas lost 16 cents to trade at $13.600 per 1,000 cubic feet.
Traders watched Tropical Storm Wilma closely as it churned in the Caribbean Sea. New forecast models placed the storm closer to western Cuba than Mexico”s Yucatan Peninsula by Friday. The storm was forecast to then turn sharply in the Gulf of Mexico toward Florida over the weekend.
"There”s no scenario now that takes it toward Louisiana or Mississippi, but that could change," said Max Mayfield, director of the National Hurricane Center in Miami.
The storm formed Monday in the northwestern Caribbean, tying the record for the most number of storms in an Atlantic season. The six-month hurricane season ends Nov. 30.
U.S. Federal Reserve Chairman Alan Greenspan said Tuesday that the spike in energy prices after the Gulf Coast hurricanes will act as a drag on the U.S. economy, although the impact on growth and inflation will not be as severe as the oil shocks of the 1970s.
"Although the global economic expansion appears to have been on a reasonably firm path through the summer months, the recent surge in energy prices will undoubtedly be a drag from now on," he said in a speech to Japanese business executives in Tokyo.
The U.S. Gulf of Mexico has been struggling to recover from back-to-back hurricanes which damaged oil platforms and forced the shutdown of refineries in the area. Katrina sent crude prices to an intraday high of $70.85 on Aug. 30.
But oil prices have pulled back in recent weeks on signs that high prices have hurt fuel demand.
The Organization of Petroleum Exporting Countries on Monday said demand growth for this year would amount to 1.18 million barrels a day, or 17 percent less than previously thought, with total demand at 83.26 million barrels a day.
"OPEC has been trying to make calming noises about the world market to try to deflect the blame for high prices, but we tend to take what they say with a pinch of salt," said David Thurtell, commodity strategist with the Commonwealth Bank of Australia in Sydney.
Lending support to prices are concerns abounding over the pace of recovery following Rita, and whether supplies will be adequate going into the Northern Hemisphere winter, when demand for heating oil peaks.
"If you look medium to long term … distillates and heating oil will be the main issue," said Frederic Lasserre, head of commodities research at SG Securities in Paris.
"If it”s cold in Europe and the United States, there”s going to be a struggle" for supplies, he said. Even if all goes well — "temperatures are normal, no more hurricanes in the United States" — prices will not fall more than $3 or $4, said Lasserre.