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 Business News | August 2006 
Oil Prices Fall as Supply Concerns for Gulf of Mexico, Iran Recede
 AFP
| | A petrol station employee waits for customers at a station. Oil prices fell by more than 2.00 dollars a barrel as concerns eased on Tropical Storm Ernesto's threat to Gulf of Mexico energy production. (AFP/Farooq Naeem) |
Oil prices fell by more than 2.00 dollars a barrel as concerns eased on Tropical Storm Ernesto's threat to Gulf of Mexico energy production.
The fall in prices also reflected a reaction to statements from Iran over the weekend that appeared to demonstrate the Islamic Republic's willingness to negotiate over its disputed nuclear program, analysts said.
With weather forecasters predicting that Ernesto could strengthen to a hurricane and strike Florida, "it's more of a concern for orange juice futures," said Wachovia analyst Jason Schenker.
Light sweet crude for October delivery fell 2.16 dollars to 70.35 dollars a barrel on the New York Mercantile Exchange.
October Brent at London's ICE Futures exchange, which was open despite a public holiday in Britain, was down 2.17 dollars at 70.53 dollars a barrel.
Concern that Hurricane Ernesto would reduce supply from the Gulf of Mexico region, where oil rigs and refineries were ravaged by Hurricane Katrina this time last year, had been driving prices higher.
"There are fewer fears because it (the hurricane) has been downgraded to a tropical storm for one thing, and its projected path does not threaten the oil installations of the Gulf of Mexico," said an analyst at Societe Generale, Frederic Lasserre.
The market remained cautious, however, on concerns the storm could regain strength, which has prompted massive evacuations in Cuba and caused thousands of tourists in the Florida Keys to head to the US mainland.
Iran underscored Sunday its determination to produce nuclear fuel but said it still sought talks on Western concerns about its nuclear programme and confirmed that UN chief Kofi Annan was due in Tehran on Saturday.
In line with a UN Security Council resolution, the United States and its European allies insist that Iran must stop enriching uranium by August 31 or face the threat of sanctions.
"There still is concern over the UN sanctions and the approaching deadline. However Russia's statement Friday acted as cold water ... taking the heat out of the market," Tony Nunan, the manager for energy risk management at Mitsubishi Corporation in Tokyo said.
Analysts fear that sanctions on the Islamic republic would disrupt Iran's vital oil supplies. Iran is the world's fourth-largest crude producer, pumping about 4.0 million barrels of oil per day of which around 2.7 million barrels are exported. |
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