Oil Prices Ease as Gustav Hits Gulf

Grant Smith of Bloomberg reports crude oil prices has retreated overnight.

``The latest forecast show that while Gustav is perfectly aimed at the heart of U.S. oil and gas production, it's not as quite strong as was initially feared,'' said Mike Wittner, Societe Generale's London-based head of oil research. ``The refining system is not as stretched this time round compared with Rita and Katrina.''

Crude oil for October delivery fell as much as $1.85, or 1.6 percent, to $113.61 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $113.93, down $1.53, at 12:48 p.m. London time. It earlier rose as much as 2.2 percent to $118.

Workers from more than 70 percent of the platforms and rigs in the Gulf have been evacuated as Gustav approaches, the U.S. Minerals Management Service said in a statement on its Web site yesterday. About 1.25 million barrels a day of oil and 6.09 billion cubic feet of gas have been shut, or more than 96 percent of offshore oil output and 82 percent of gas production.

The Gulf of Mexico normally produces about 1.3 million barrels of oil and an estimated 7.4 billion cubic feet of gas a day, according to the Minerals Management Service, part of the U.S. Interior Department.

Nymex electronic trading opened early today to allow traders to respond to Gustav. Trades will be recorded as part of the Sept. 2 session because of today's U.S. Labor Day holiday.

Brent crude oil for October settlement was down $1.71, or 1.5 percent at $112.34 barrel on the ICE Futures Europe Exchange.