Oil prices fell yesterday as workers headed back to deep sea platforms that were bypassed by a rapidly weakening storm in the Gulf of Mexico.
Ida, once a Category 1 hurricane, was downgraded to a tropical storm Monday and then lost even that status Tuesday as its winds lost their punch.
Producers like Royal Dutch Shell and Anadarko reported no damage to facilities and said flights bringing workers back to abandoned platforms and rigs would begin yesterday.
Benchmark crude for December delivery fell 38 cents to settle at US$79.05 a barrel on the New York Mercantile Exchange.
Even on Monday, when tropical storm Ida posed a potential threat to Gulf platforms, it appeared that the affects of a weakened U.S. dollar played a more significant role as oil prices rose.
The U.S. dollar tumbled so far to start the week, a person holding a euro could trade it in for $1.50, the first time the U.S. currency has been that weak since July. Because crude is traded in U.S. dollars, that means an investor could trade in euros for U.S. dollars and buy oil for a relative bargain.
Even though there are huge supplies of crude right now, the sagging dollar allows investors to buy oil and pay for storage, selling the oil months later when the price is right.
Yesterday, however, the U.S. dollar regained ground and crude prices fell.
The response to oil company activity in the Gulf ahead of the storm was muted.
Companies shut down 30 per cent of oil production and 27 per cent of natural gas production and evacuated about 18 per cent of nearly 700 platforms, according to the U.S. Minerals Management Service.
In the past, that would have been enough to send prices soaring by $5 to $10 per barrel.
Last year, retail gasoline prices spiked when hurricanes Ike and Gustav cut off supply routes, particularly in the Southeast. But Ida was weak compared with those storms and demand for fuel is not much better. A similar spike is very unlikely
Prices at the pump edged lower overnight, falling 0.6 cents to $2.658 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 2.8 cents lower than a week ago, but 41.8 cents more than a year ago.
In Canada, the price of gas averaged C$1.027 per litre, up from 96.2 cents a month ago and 93.6 cents at this time last year, according to price-watching website GasBuddy.com.
The U.S. Energy Department late Monday reported that retail gasoline prices fell for the first time in five weeks.
The International Energy Agency lowered its global oil demand forecast as well on Tuesday from 106 million barrels per day to 105 million barrels per day.
New technologies that have opened up vast reserves of natural gas will lead to a glut in supply for at least the next several years, the IEA said.
Natural gas for December delivery plunged four per cent, or 20.3 cents, to settle at US$4.467 per 1,000 cubic feet on Nymex.
In other Nymex trading, heating oil fell a penny to settle at $2.0523 a gallon. Gasoline for December delivery fell less than a penny to settle at $1.9774 a gallon.
In London, Brent crude for December delivery fell 27 cents to settle at $76.50 on the ICE Futures exchange.
