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Oil prices continued a retreat from record highs yesterday after tropical storm Ingrid faded in the Atlantic over the weekend, soothing fears it could hit Gulf of Mexico crude production and refining.
US crude for October fell US51c to US$78.59 a barrel, after falling US99c on Friday, when it hit a fresh record of US$80.36.
Ingrid, the ninth named storm of the 2007 hurricane season, was downgraded on Saturday to a tropical depression, while three refineries in Texas shut by the previous Gulf of Mexico storm were working to restore operations.
Also allaying supply concerns, Mexico's state-owned monopoly Pemex said it would resume natural gas and oil supply to its clients from today after attacks on several of its pipelines last week cut off flows.
Hurricane and other supply risks, together with falling US inventories and fund flows into energy from poorly performing equity markets, have fuelled the recent hike in oil prices. But fears of a global credit crunch have kept a lid on the rally.
"The situation in the credit markets and the fallout from that is taking a lot of focus away from more direct factors such as geopolitical concerns or storms," said Andrew Harrington, a commodities analyst at ANZ Bank.
Investors are looking ahead to a monetary policy decision in the United States, expecting the central bank to lower rates and help ease a credit crunch that many fear could spark a recession and hit oil prices.
British mortgage lender Northern Rock is the latest casualty in the unfolding credit squeeze and last week had to turn to the Bank of England for emergency funds.
Former US Federal Reserve chairman Alan Greenspan said yesterday the turmoil in housing and credit markets did not look like it would produce a broader economic downturn.
But Opec said on Friday turmoil in world financial markets could dent fuel consumption and uncertainty over supply and demand made it difficult to determine oil output policy.
Though oil prices have quadrupled since 2002, when adjusted for inflation the price is below the US$90-a-barrel peaks of the Iranian Revolution in 1979.
- Reuters
