Oil prices fall as Ida fades, dollar climbs; settles at $79.05

Benchmark crude for December delivery fell 37 cents to settle at $79.05 a barrel on the New York Mercantile Exchange.

By MARK WILLIAMS
The Associated Press

11/10/2009

Oil prices fell Tuesday as workers headed back to deep sea platforms that were bypassed by a rapidly weakening storm in the Gulf of Mexico.

Ida, once a Category 1 hurricane, was downgraded to a tropical storm Monday and then lost even that status Tuesday as its winds lost their punch.

Producers like Royal Dutch Shell and Anadarko reported no damage to facilities and said flights to platforms and rigs in the Gulf would begin Tuesday.

The dollar tumbled so far, a person holding a euro could trade it in for $1.50. Because crude is traded in dollars, that means an investor trading in euros could buy oil for a relative bargain.

Even though there are huge supplies of crude right now, the dollar is so weak that an investor can buy oil and then pay to store it for months before having to sell it on the market.

The dollar gained back some ground Tuesday and oil prices fell.

The response to oil company activity in the Gulf ahead of the storm was muted.

Companies shut down 30 percent of oil production and 27 percent of natural gas production and evacuated about 18 percent of nearly 700 platforms, according to the U.S. Minerals Management Service.

Last year, retail gasoline prices spiked when hurricanes Ike and Gustav cut off supply routes, particularly in the Southeast, but demand for energy is low now and companies were expected to resume operations quickly so Ida is expected to little effect on prices.

Prices at the pump edged lower overnight, falling 0.6 cents to $2.658 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 2.8 cents lower than a week ago, but 41.8 cents more than a year ago.

The Energy Department late Monday reported that retail gasoline prices fell for the first time in five weeks.

The International Energy Agency lowered its global oil demand forecast as well on Tuesday from 106 million barrels per day to 105 million barrels per day.

New technologies that have opened up vast reserves of natural gas will lead to a glut in supply for at least the next several years, the IEA said.

Natural gas for December delivery plunged 4 percent, or 19.3 cents, to $4.477 per 1,000 cubic feet on Nymex.

In other Nymex trading, heating oil fell more than 2 cents to $2.0386 a gallon. Gasoline for December delivery fell nearly 3 cents to $1.9530 a gallon.

In London, Brent crude for December delivery fell $1.26 to $76.51 on the ICE Futures exchange.

Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.

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