Oil edged down on Tuesday as worries about weakening oil demand overshadowed fears that the Atlantic hurricane season could threaten supply.
United States light crude for July delivery fell 16 cents a barrel to $127,60 by 6.38am GMT, reversing Monday’s 41-cent gain as the start of the hurricane season stirred concerns that oil and natural gas output could be disrupted in the Gulf of Mexico.
London Brent crude fell 47 cents to $127,55 a barrel, off an earlier low of $127,13.
Prices rebounded from earlier lows on Tuesday after the US dollar slipped on a report that investment bank Lehman Brothers may raise up to $4-billion of capital, stirring worries about more credit crisis fall-out.
”You cannot disregard the hurricane season. But it is a difficult call, pitching US demand versus the potential hurricane threat and other supply worries,” said Mark Pervan, senior commodities analyst with ANZ in Australia.
The first storm of the Atlantic hurricane season, Tropical Storm Arthur, forced Mexico to shut two of its three main crude oil ports because of rough seas over the weekend, kicking off the hurricane season in the Atlantic.
Even though it quickly weakened into a tropical depression, Arthur was a timely reminder of the start-up of the hurricane season that forecasters predict will be more active than usual.
Hurricane Katrina in 2005 wreaked havoc in the Gulf of Mexico and forced the closure of several US refineries for weeks.
Adding to supply worries, Russia’s production for May fell 0,7% from a year ago to 9,4-million barrels per day, the fifth straight monthly decline in output from the world’s second-largest oil exporter.
But attention on Tuesday shifted back to concerns over potential demand destruction as prices remained near last month’s record high $135,09, which has forced several Asian countries to cut oil subsidies and is crimping demand in the developed world. — Reuters