Oil prices slip as Isaac mostly spares platforms

Nasa / Reuters

Hurricane Isaac is seen churning in the Gulf of Mexico after making landfall on the Louisiana coast in this NASA handout satellite image taken on Aug. 28, 2012. Isaac did very little damage so far to Gulf oil facilities.

By Reuters

Brent crude oil slipped to $112 on Wednesday as Hurricane Isaac, which hit land in Louisiana, left U.S. Gulf Coast oil production facilities without significant damage.

U.S. energy companies have shut most facilities in the Gulf of Mexico, as a precautionary measure, cutting the region's oil output by more than 90 percent.

An unexpected rise in U.S. crude inventories and data showing weakening U.S. consumer confidence added to bearishness, although lingering tensions in the Middle East supported prices.

Brent crude oil futures for October fell more than $1 per barrel to a low of $111.50 before recovering to around $112 by 1210 GMT. U.S. crude was down 70 cents at $95.60.

"It is expected that oil production in the Gulf of Mexico will quickly return to normal," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt. "What is more, inventory data from the United States were disappointing."

Related: Hurricane Isaac's storm surge overtops levee, sends 12-foot flood into La. homes

Worries about supply disruptions resulting from the hurricane on Monday pushed Brent to a high of $115.50 per barrel, while NYMEX futures hit a peak of $97.72. Brent has risen around 6.5 percent so far this month while U.S. oil has gained 8.5 percent, its biggest monthly rise since February.

Isaac has brought high winds and soaking rains to southern U.S. states, posing the first test for multibillion-dollar flood defences put in place in New Orleans after Hurricane Katrina devastated the U.S. Gulf Coast seven years ago.

Concerns over the global economy and uncertainty about the?Federal Reserve's monetary policy were also muddying the outlook for oil demand, adding to pressure on prices.

While data showed U.S. home prices rose in June for a fifth straight month, another measure of U.S. consumer confidence slipped to a nine-month low in August as Americans were more pessimistic about business and labor market prospects.

Clues to whether the?Fed is leaning towards more stimulus are expected from Chairman Ben Bernanke in a speech on Friday at an annual meeting at Jackson Hole, Wyo. Bernanke has used the event in the last two years to indicate the Fed's policy intentions.

Oil prices also came under pressure from an unexpected rise in U.S. crude oil inventories, according to a report from the American Petroleum Institute (API).

U.S. crude oil stocks rose 5.5 million barrels last week, against expectations for a 1.5 million-barrel drop.

Tensions in the Middle East, the world's biggest oil-producing region, has also supported oil prices.

Iran, in dispute with Western nations over its nuclear program, said it had no plans to show its nuclear sites to diplomats visiting Tehran for this week's Non-Aligned Movement summit, despite an earlier offer.

Adding to investor uncertainty are mixed signals from policymakers on a White House plan to release some U.S. strategic reserves to rein in rising prices.

Analysts say the White House could use the disruption of Gulf of Mexico production as a reason to release some oil into markets. But such a move would be controversial. The head of the International Energy Agency has voiced strong opposition to any use of emergency oil stocks unless there is a supply shortage.

Reuters monthly oil price poll, based on forecasts from 28 analysts, shows analysts have raised their oil price forecasts for this year and 2013 due to supply concerns and to expectations for a further round of monetary policy stimulus.

The poll projects Brent at an average of $109.50 in 2012, up $1.20 from the July poll. For 2013, Brent is forecast to average $107.20 a barrel, a rise of 70 cents from July.

NBC's Lester Holt reports from New Orleans, La., where the levees and systems of pumps are holding up against Hurricane Isaac. There was an overtopping towards the Gulf, but there has not yet been a breach.

Copyright 2011 Thomson Reuters. Click for restrictions.

Source: http://bottomline.nbcnews.com/_news/2012/08/29/13546710-oil-prices-slip-as-hurricane-isaac-mostly-spares-gulf-platforms?lite

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