Oil prices fall after tropical depression in the Gulf of Mexico

Oil prices fell Monday after a tropical depression in the Gulf of Mexico dissipated without causing damage to key oil and gas infrastructure.

Photo: Oil prices fall after tropical depression in the Gulf of Mexico

Light, sweet crude for November delivery lost 60 cents to US$81.02 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell 16 cents to settle at US$81.62 a barrel Friday amid profit taking.

November crude became the benchmark front-month contract after the October contract expired Thursday at a record close of US$83.32. Prices for October reached US$83.90 in intraday trading, also a record.

A tropical depression that some feared would develop into a storm capable of damaging oil and gas installations in the Gulf of Mexico weakened over the weekend.

Concerns about the weather system had caused crude oil and natural gas companies to evacuate hundreds of workers from offshore rigs and suspend about a quarter of the Gulf of Mexico's daily oil and gas production. Workers have since been redeployed and production restored.

BP PLC, Exxon Mobil Corp., Anadarko Petroleum Corp., Royal Dutch Shell PLC and ConocoPhillips said they were resuming production of more than 1 million barrels of oil equivalent a day, according to Dow Jones Newswires.

The U.S. Minerals Management Service, the agency that oversees activity in the Gulf, said Sunday that about 595,000 barrels of oil a day, or 45.8 percent of the Gulf's total capacity, and about 1.339 billion cubic feet of gas a day, or 17.4 percent of natural gas production in the Gulf, remained shut-in.

That's an improvement from Friday, when the agency's statistics showed 62.7 percent of the Gulf's oil output and 30.8 percent of its gas production was off line.

Oil's advance to new records last week was driven by a combination of the Federal Reserve's half-point interest rate cut, the falling dollar and concerns that tropical storms will strike key oil and gas installations in the Gulf of Mexico.

Interest rates and their role in pulling the dollar lower are drawing fresh investment into energy markets, analysts say. Oil and other commodities are priced in dollars, and they still appear inexpensive to overseas investors, whose currencies have strengthened against the greenback.

November Brent crude dropped 48 cents to US$78.82 a barrel on the ICE futures exchange in London.

Nymex heating oil fell 0.55 cent to US$2.2507 a gallon (3.8 liters) while gasoline prices lost 0.70 cent to US$2.1075 a gallon. Natural gas futures dropped 7 cents to US$6.01 per 1,000 cubic feet.