SINGAPORE: Oil dipped half a dollar to near $109 on Wednesday, deepening this week's sharp drop as traders looked past Hurricane Gustav to focus on a wobbly global economy and the gloomy outlook for energy demand. Oil has tumbled more than $6 since Friday, touching its lowest in five months after early signs that a weakened Gustav caused little damage to US oil installations. On Wednesday, US crude fell 52 cents to $109.19 a barrel after settling on Tuesday at $110.15, below its 200-day moving average for the first time since May 2007. Technical traders say the break of that key support level could contribute to a deeper decline, extending oil's nearly $40 a barrel slump since its July 11 record high of $147.27. London Brent crude slid 53 cents to $107.81. Although it may be days before energy companies are able to fully assess and restore the one-third of US refining capacity and one-quarter of oil output that was shut as a precaution, many oil traders had already turned their attention elsewhere. "It's the economy, economy, economy. Everyone's worried about demand destruction," said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp. Signs of slowing oil consumption in major developed economies has undermined the fundamental argument that booming Asian giants like China and India are straining oil supplies, while a rebound in the US dollar over recent months has prompted many funds to unwind their short-dollar/short-commodities trades. The risk that Gustav could be a repeat of 2005's Hurricanes Katrina or Rita, which wrecked over 100 offshore oil platforms and shut several major refineries for months for repairs, helped stem oil's decline last week, but support has since evaporated. With early inspections turning up little to no damage to the facilities, the International Energy Agency, which had been prepared to release emergency oil stocks in the event Gustav caused severe damage, said it saw no need for emergency supplies. |
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