Oil steady in Asia as Ike strengthens toward Texas

[September 11, 2008]  SINGAPORE (AP) -- Oil prices were steady near a 5-month low Thursday in Asia as Hurricane Ike strengthened as it headed through the Gulf of Mexico toward crude drilling and refining operations on the Texas coast.

Light, sweet crude for October delivery fell 10 cents to $102.48 a barrel in electronic trading on the New York Mercantile Exchange midafternoon in Singapore. The contract fell 68 cents overnight to settle at $102.58, the lowest close since April 1.

Ike, coming on the heels of last week's Hurricane Gustav, was expected to blow ashore early Saturday somewhere between Corpus Christi and Houston, with some forecasts saying it could become a Category 4, with winds of at least 131 mph.

"We're at the peak of hurricane season, and the market is reacting to these big storms coming through the Gulf," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne.

On Thursday, Ike was a Category 2 storm with winds near 100 mph. It was churning about 645 miles east of Brownsville, Texas, and moving west-northwest near 9 mph, after tearing through Cuba and killing at least 80 people in the Caribbean.

Texas is home to 26 refineries that account for one-fourth of U.S. refining capacity, and most are clustered along the Gulf Coast in such places as Houston, Port Arthur and Corpus Christi. Exxon Mobil Corp.'s plant in Baytown, outside Houston, is the nation's largest refinery.

Refineries are built to withstand high winds, but flooding can disrupt operations and -- as happened in Louisiana after Gustav -- power outages can shut down equipment for days or weeks.

A decision Wednesday by the Organization of Petroleum Exporting Countries to reduce output by 520,000 barrels a day also helped boost oil prices, which have fallen 30 percent since reaching a record $147.27 on July 11 on concerns slowing global economic growth will undermine demand for crude.

"OPEC was trying to slow this steep decline," Pervan said. "But we're in a bearish trend right now and I still expect the price to fall another $10."

Evidence of falling oil U.S. crude inventories also helped push prices higher. The Energy Department's Energy Information Administration said Wednesday that crude inventories fell by 5.9 million barrels last week compared to the previous week, and that gasoline inventories fell by 6.5 million barrels. The EIA also reported, however, that inventories of distillates -- which include heating oil and diesel fuel -- fell by a lower-than-anticipated 1.2 million barrels.

In other Nymex trading, heating oil futures rose 1.84 cents to $2.9208 a gallon, while gasoline prices gained 4.84 cents to $2.71 a gallon. Natural gas for October delivery rose 16.8 cents to $7.561 per 1,000 cubic feet.

In London, October Brent crude was down 32 cents at $98.65 a barrel on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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