Brent crude oil slipped to $112 on Wednesday as Hurricane Isaac, which hit land in Louisiana, left US Gulf Coast oil production facilities without significant damage.
US energy companies have shut most facilities in the Gulf of Mexico, as a precautionary measure, cutting the region’s oil output by more than 90%.An unexpected rise in US crude inventories and data showing weakening US consumer confidence added to bearishness, although lingering tensions in the West Asia supported prices.
Brent crude oil futures for October fell more than $1 per barrel to a low of $111.50 before recovering to around $112. US crude was down 70 cents at $95.60.
It is expected that oil production in the Gulf of Mexico will quickly return to normal, said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt. What is more, inventory data from the United States were disappointing.
Worries about supply disruptions resulting from the hurricane on Monday pushed Brent to a high of $115.50 per barrel, while NYMEX futures hit a peak of $97.72.
Brent has risen around 6.5% so far this month while US oil has gained 8.5%, its biggest monthly rise since February. Isaac has brought high winds and soaking rains to southern US states, posing the first test for multibillion-dollar flood defences put in place in New Orleans after Hurricane Katrina devastated the US Gulf Coast seven years ago.
Concerns over the global economy and uncertainty about the US Fed’s monetary policy were also muddying the outlook for oil demand, adding to pressure on prices.
While data showed US home prices rose in June for a fifth straight month, another measure of US consumer confidence slipped to a nine-month low in August as Americans were more pessimistic about business and labour market prospects. Clues to whether the US Federal Reserve is leaning towards more stimulus are expected from Chairman Ben Bernanke in a speech on Friday at an annual meeting at Jackson Hole, Wyoming. Bernanke has used the event in the last two years to indicate the Fed’s policy intentions.
A poll of 61 economists gave a 45% chance of the Fed announcing a third round of quantitative easing, or QE3, after its policy meeting on September 12-13. Since late 2008, the Fed has bought $2.3 trillion in long-term securities to spur growth, pumping billions into asset markets and injecting huge liquidity into and commodities.
During the first round of QE from November 2008 to March 2010, oil