Oil prices dipped to near $108 a barrel Wednesday as the dollar continued to strengthen and attention shifted to concerns over slowing global demand for crude after Hurricane Gustav left oil installations in the Gulf of Mexico region largely undamaged. By midday in Europe, light, sweet crude for October delivery was down $1.50 to $108.21 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract settled at US$109.71 a barrel, down $5.75 from the close of trading Friday, before the Labor Day weekend. US floor trading was closed Monday. At one point Tuesday, it fell as low as $105.46, its lowest level since April. In London, October Brent crude fell 65 cents to $107.69 a barrel on the ICE Futures exchange. Since oil prices reached a record $147.27 on July 11, sentiment among traders has shifted to expect slowing economic growth in the US, Europe and Japan will likely spread to developing countries and undermine crude demand. “That's been a focus of the market, that the demand side has weakened, particularly in developed countries like the US,” said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. “Had it not been for the hurricane, we would have seen a lower price profile over the last week.” Virtually all oil and natural gas production remained shut down in the Gulf of Mexico, according to the US Minerals Management Service. It was too soon to say when output might resume, though some oil companies were preparing to redeploy evacuated personnel as early as Wednesday. Without serious damage, oil and natural gas facilities should start up again in a day or two, while coastal refineries could take two to four days to resume production, depending on their size. In 2005, Hurricanes Katrina and Rita knocked out the region's offshore energy infrastructure for several weeks. Also weighing on oil Wednesday was a stronger dollar versus the euro. A rising dollar encourages investors who bought oil as a hedge against inflation to sell. The euro fell to $1.4447 from $1.4518 late Tuesday in New York, while the dollar lost some ground to 108.58 Japanese yen from 108.67 yen Tuesday. “It's certainly a factor,” Moore said.
