Accessibility links

Breaking News

Gustav Spares Oil Facilities in US Gulf Coast

Crude oil prices dipped below $109 a barrel Wednesday after oil companies reported no serious damage to installations in the Gulf of Mexico.

The threat of disruptions from Hurricane Gustav sent prices sharply higher last week. Some economists say oil prices could fall further as investors shift their attention back to the slowing demand for oil. But analysts warn the hurricane season isn't over yet. VOA's Mil Arcega has more.

Crude oil prices dropped to their lowest level in five months as investor concerns over supply disruptions eased.

Oil analyst Anthony Grisanti says many traders were relieved that Hurricane Gustav had weakened considerably by the time it approached offshore oil rigs in the Gulf of Mexico.

"Because there was so much hype leading up to this," Grisanti said, "that was going to be so damaging, so devastating, things like that. Once the relief button was hit, we dropped quite a bit, quite fast, and the market is still looking weaker right now."

Grisanti says the price of oil is likely to drop further after hitting a peak of $147 a barrel in July.

But he says much will depend on the impact of future storms, like Tropical Storm Hanna, which is expected to reach the southern Atlantic coast of the U.S. by week's end.

"I do expect the market to be weaker," Grisanti added, "but until these storms pass and I think there's a couple more even forming behind that, until these pass I don't really see this thing trading significantly below, say, a hundred dollars, although it could hit $100 at this point."

Oil facilities on the Gulf Coast provide about a quarter of the domestic oil in the U.S. None of the oil installations has resumed operations yet, but some workers evacuated before the storm are starting to return.

About 3,000 people work daily at the Port Fourchon facility in Louisiana.

Port commissioner Chucky Cheramie says the lost income is in the hundreds of millions of dollars.

"A lot of these guys that are supposed to be working now have not earned any income. So the quicker we get it back going for our people, the quicker it's going to be for them to start getting back their paychecks to support their families," said Cheramie.

Experts say it's still too soon to say when output might resume. In the meantime, the U.S. Energy Department says it will release about 250,000 barrels from the nation's emergency oil reserves to help stabilize gasoline prices.