LONDON, 13 September 2005 — World oil prices fell yesterday on easing supply concerns, as Hurricane Ophelia was downgraded to a tropical storm and amid signs that world demand growth for energy was slowing, analysts said.
New York’s main contract, light sweet crude for delivery in October fell by 83 cents to $63.25 per barrel in early deals. In London, the price of Brent North Sea crude for October delivery slumped $1.13 to $61.75 per barrel. “Ophelia is no longer a major danger” to US oil facilities, Investec analyst Bruce Evers said.
Ophelia pales in comparison to Hurricane Katrina, which slammed into the southern Gulf Coast on Aug. 29, wreaking havoc to US oil production. Katrina was a category four hurricane, with sustained winds hitting 210-250 kilometers (131-155 miles) per hour, and surges of four to five meters (13-18 feet) above normal. Nevertheless, Ophelia’s inching toward the east coast yesterday prompted authorities to post storm warnings, ready troops and urge residents to leave isolated islands. The National Hurricane Center said the storm could pick up force today and become a category one hurricane again. Prices were falling also after the International Energy Agency said demand strains on the world oil market may be abating.
The IEA on Friday said that the total world supply situation in August was 2.0 million barrels a day above the figure 12 months earlier. In addition, production by members of the Organization of Petroleum Exporting Countries (OPEC) had risen by 0.75 million barrels per day on a 12-month comparison.
Prices are lower again, “as market participants focus more on the damage to demand rather than the damage to supply caused by Hurricane Katrina and high prices,” Fimat analyst John Kilduff said.
On Aug. 30, the day after Katrina battered US oil facilities on the Gulf coast, New York’s main oil contract hit a record-high $70.85 per barrel, while in London Brent reached an all-time high of $68.89 - leaving prices double the levels in 2003.
However prices fell sharply between last Friday and Wednesday as a number of oil facilities came back on line and after the United States and its industrial partners agreed to tap emergency reserves.
OPEC General Secretary Adnan Shihab-Eldin said current oil prices remained too high and would drop, in an interview with a German magazine published yesterday. “The fundamentals of the market don’t in any case justify a price this high,” he told the weekly Der Spiegel magazine. Certain media had meanwhile interpreted further comments by Shihab-Eldin to mean that OPEC was ready to hike production by some 2.0 million barrels daily.