The price of oil continued to fall on Tuesday morning, approaching $105 a barrel, after the downgraded Hurricane Gustav appeared to have left the major oil facilities in the Gulf of Mexico unscathed.
On Tuesday in New York, light, sweet crude for October delivery fell $8.30 to $107.15 a barrel in electronic trading. Close of trade saw the price of crude creeping ever closer to the symbolic mark of $100 a barrel - only climbed above by crude a little more than 6 months ago.
London's Brent crude fell $3.46 to trade at $105.95.
The drop in oil prices also helped steer US stock futures higher, with futures on the Dow Jones Industrial Average (DJIA) up 87 points in early morning action.
Traders are now refocusing their attention to the long-term storms hanging over the price of a barrel of crude oil including a softening global economy, a downturn for demand in oil in the US and China, and a currently strengthening US dollar.
Such factors had already begun to drive prices way down from their record July 11 high, even before Hurricane Gustav was christened with its name.
Oil traders speculated that these shifting causational factors will further dampen demand for crude, even in the booming economies of both China and India.
Victor Shum, an energy analyst with consultancy firm Purvin & Gertz – based in Singapore, said: “The market continues to be weighed down by worries of a global economic downturn and slowing oil demand in developing markets.”
Escalating fears of the hurricane combined with the recent conflict between Georgian and Russian troops in South Ossetia have, at least temporarily, halted the slide over concerns of supply.
Mike Wittner, of Societe Generale, speculated that: “If it were not for these threats, we would have been testing $100 already.”
Hurricane Gustav had already weakened as it hit the US Gulf of Mexico coast south-west of New Orleans. It was downgraded to a tropical storm after hitting the Louisiana port of Fourchon.
US oil refiners can breathe a sigh of relief as initial checks seem to have reported no damage, thus far, to offshore platforms.
Royal Dutch Shell, BP and ConocoPhillips are all currently preparing to get their Gulf of Mexico sites up and running again. Shell said, on Monday, that it planned to conduct a flyover of its assets in the region to assess the damage, and also hoped to begin sending staff back as soon as possible to sites that were out of the hurricane's path.
Although hurricane season is far from over, and is notoriously difficult to forecast, it is demand for oil, which is still slowing in tandem with the global economy, that has a more long-term effect on the price of crude oil.
