LONDON, July 11: Oil prices fell over a dollar on Monday as US oil and gas facilities started returning to normal following the passage of Hurricane Dennis without major damage. US crude dropped $1.23 to $58.40 a barrel, extending losses of $1.10 on Friday and down from last week’s record $62.10. London Brent crude shed $1.25 to $56.95 a barrel.
“People perceived that the hurricane may not be as damaging as Hurricane Ivan. That’s why people are taking profits,” said Tony Nunan, at Mitsubishi Corp.’s international energy business.
Hurricane Dennis raced ashore on the US Gulf Coast on Sunday, leaving production companies to start restoring the oil and gas output that had been shut as a precaution.
Companies said much of the production should return to normal by late Monday or early Tuesday while the Louisiana Offshore Port, the region’s main oil import terminal resumed offloading crude after a two-day shut down.
Almost half the region’s oil production and nearly a third of gas output had been shut in ahead of the hurricane.
Traders said crude speculators on the New York Mercantile Exchange were offloading positions, hitting prices.
“I think the market cannot sustain prices above $60 without a serious supply disruption such as a hurricane or a refinery outage,” said Mike Wittner, head of energy market analysis at Calyon.
“As the market tries to rise above $60, there will be profit-taking which we have seen periodically,” he added.
World demand has been remarkably resilient to high prices in recent years but now evidence seems to be building that Chinese demand growth is lending less support to oil markets.
Analysts said signs the world’s second biggest energy consumer and one of the main drivers of last year’s oil price rally, is seeing a sustained slowdown in oil demand growth could be key for the future direction of prices.
Crude imports into China dipped to 2.7 million barrels per day in June from 2.74 million bpd last year as flagging demand and retail price caps prompted refiners to cut processing rates and draw from domestic stockpiles.
China’s apparent oil demand had contracted over 4 per cent in May from a year earlier as refiners rushed to export oil products, while Sinopec, the country’s top refiner, has also been reselling millions of barrels of foreign crude.
“Prices above $50 require unceasing bullish news, and that is exactly was has been provided over the last several weeks,” Fimat analysts wrote in a report. “This morning’s economic news out of China should erode the foundation of the bullish argument.”—Reuters
