Oil steady near $131 a barrel

[July 22, 2008]  SOUTHPORT, England (AP) -- Oil prices held near $131 a barrel Tuesday on expectations Tropical Storm Dolly won't disrupt oil operations in the Gulf of Mexico.

Royal Dutch Shell, Europe's biggest oil company, said Monday it was evacuating workers from oil rigs in the western part of the Gulf but didn't expect its production to be affected by the storm.

"The market doesn't see Dolly as a real threat at this point," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz Inc. in Singapore. "It doesn't look like it will have much of an impact."

By midday in Europe, light, sweet crude for August delivery was down 7 cents at $130.97 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.16 to settle at $131.04 a barrel on Monday.

August Nymex crude futures have fallen 11 percent over the past week from a trading record of $147.27 hit on July 11.

The August contract expires later in the day at the close of the floor session in New York. The September contract, which will become the new front month, was down 8 cents at $131.74 a barrel in electronic trade.

Possible future storms, tensions over Iran's nuclear program and growing demand for crude in developing countries should continue to underpin oil prices, which have risen about 74 percent in the past year, Shum said.

"There's been no slowdown in Chinese demand growth, and the Iran situation remains fluid," Shum said. "We've had a correction, but I expect a resurgence in prices in the near-term."

Talks among Iran, Washington and five other world powers ended Saturday with Iran rejecting calls to freeze uranium enrichment. In response, the six gave Iran two weeks to respond to their demand, setting the stage for a new round of U.N. sanctions.

"With the weekend's talks on Iran's nuclear program resulting in little progress, the political risk premium that had eroded ahead of the meeting was back in play," said analysts at JBC Energy in Vienna, Austria.

Tropical Storm Dolly was expected to bring high winds and dump 10 to 20 inches of rain in coastal areas near the U.S.-Mexican border. Forecasters at the National Hurricane Center in Miami say it is likely Dolly will become a hurricane, but they do not expect it to become a major hurricane.

Dolly was located about 295 miles southeast of Brownsville, Texas, before dawn Tuesday. It was moving west at around 15 mph and had maximum sustained winds near 60 mph.

Dolly's winds were expected to strengthen Tuesday to hurricane force, which would mean at least 74 mph.

In other Nymex trade, heating oil futures were up 0.15 cent at $3.7494 a gallon while gasoline prices rose 0.44 cent to $3.2215 a gallon. Natural gas futures fell 10.1 cents to $10.409 per 1,000 cubic feet.

In London, September Brent rose 24 cents to $132.85 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore and Christopher Sherman in McAllen, Texas, contributed to this report.

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