LONDON: Crude oil prices plunged briefly below $119 a barrel yesterday for the first time in three months as Tropical Storm Edouard was set to spare energy facilities in the Gulf of Mexico, traders said.
Prices slumped by more than $5 a barrel in London and New York, also pushed down by a government survey that revealed US consumer spending had cooled in June and inflationary pressures accelerated.
The weak US economy is causing a drop in demand for energy in the United States, the world’s biggest consumer of energy.
Oil prices fought back from their lows due to new tensions over key crude producer Iran.
The price of Brent North Sea crude oil hit as low as $118.80 a barrel in electronic deals, a level last reached on May 5.
New York’s light sweet crude slid to an intra-day trough of $119.50.
In late trade yesterday, Brent North Sea crude for September delivery stood at $120.63 a barrel, down $3.55 from Friday’s close.
New York’s main contract, light sweet crude for September, was at $121.02 a barrel, a loss of $4.08.
Tropical Storm Edouard was expected to be very near the southwestern coast of Louisiana and the upper Texas coast by late today, but oil installations were expected to avoid damage.
Nevertheless, Anglo-Dutch energy group Royal Dutch Shell said yesterday that it would begin to evacuate about 40 staff from the Gulf of Mexico.
“Given the forecast for Tropical Storm Edouard, Shell will begin limited evacuations of approximately 40 personnel from some of its Gulf of Mexico West operations area today (Monday),” the company said in a statement.
“No further evacuations are planned at this time and based on current information and forecast, we do not expect any impact on Shell operated production in the Gulf of Mexico.”
The tropical storm headed toward Texas’s Gulf of Mexico coastline yesterday, threatening to batter the region with hurricane-strength winds, the National Hurricane Center said.
Meanwhile, OPEC oil supply rose for a third consecutive month in July due to higher output from members, a Reuters survey showed yesterday.
Supply from the Organization of the Petroleum Exporting Countries climbed to 32.58 million barrels per day in July from 32.33 million bpd in June, according to the survey of oil firms, OPEC officials and analysts.
“OPEC production may be on the rise, but it does not hide a sharp contraction in non-OPEC crude output in the first half of this year and deteriorating prospects for Russian supply,” said Harry Tchlinguirian at BNP Paribas.
Output in Russia fell in July from a year ago, Energy Ministry data showed yesterday. Russia is the second-largest exporter in the world and has been the engine of supply growth outside OPEC in recent years.
Given the drop in prices since last month, some OPEC members have expressed concern about output levels and raised the possibility of supply cuts should prices fall further.
Iran’s oil minister, Gholamhossein Nozari, warned on Saturday that OPEC members which have raised supply “must bring it under control” should prices fall further.
OPEC has kept its supply target unchanged this year and meets to review output policy on Sept. 9.