BUDAPEST, Hungary – Oil prices slipped below $59 Monday after Hurricane Dennis missed key Gulf of Mexico refineries and spared the market from a sudden disruption in supply at a time of high demand.
Speculators abandoned their positions after Hurricane Dennis was downgraded to tropical storm status and the downward trend is expected to continue in the wake of last week”s hurricane-fueled rally in prices.
"Concerns about likely damage to oil and gas facilities from the hurricane have waned and the energy companies operating in the Gulf of Mexico expect to have restored most shut-in production by today," CSFB said.
Light, sweet crude contract for August delivery slipped 83 cents to $58.80 a barrel on the New York Mercantile Exchange in European electronic trading.
Heating oil fell nearly 3 cents to $1.6900 a gallon, while gasoline dropped more than 4 cents to $1.7225.
On London”s International Petroleum Exchange, Brent futures for August delivery were down $1.20 to $58.08 per barrel.
Hurricane Dennis caused at least 20 deaths in the Caribbean Sea before pounding the southeastern U.S. coast over the weekend as residents fled its 120 mph winds. Traders had feared a repeat of last year”s Hurricane Ivan, which damaged oil platforms and caused months of lost production in the Gulf of Mexico.
But the region”s oil facilities, the source of 30 percent of U.S. output, weathered Hurricane Dennis largely unscathed.
"The market will continue to expand last Friday”s sell-off given that there”s minimal damage caused by the hurricane," said analyst Victor Shum of Texas-based energy consultants Purvin & Gertz in Singapore.
Adding to bearish sentiment was news that Chinese crude oil imports rose by only 3.9 percent in the first half of 2005, compared to a 39.3 percent increase in the same period last year. Beijing imported 63.4 million tons from January to June, the official Xinhua News Agency reported Monday.
"This appears to extend the weak oil demand trends seen so far this year," CSFB said.
China is the world”s second-largest consumer of crude behind the United States.
Shum said he expected prices to slip further in the short term, but said they would rise again because of a perception that supply will be tight over the long term.
"Traders remain on the bullish side given concerns about the tight supplies, especially looking ahead at the fourth quarter. These concerns have not been allayed," he said.
Global oil demand is expected to average more than 84 million barrels per day this year, leaving an estimated 1.5 million barrels per day in excess production capacity that can be tapped in the event of a supply disruption.
At the Group of Eight summit in Scotland on Friday, Russian President Vladimir Putin said his country will increase its exports.
Crude oil futures are more than 50 percent above year ago levels, though still below the inflation-adjusted high above $90 a barrel reached in 1980.