Gustav Passes, Oil Falls to Nearly $107by Tim Manni
Hurricane Gustav ran its course through the Gulf of Mexico and over the US coast doling out less damage than originally expected. By Friday evening, oil prices reached $115.46, and rose over a dollar on Sunday to $116.70, on fears the hurricane would damage offshore-drilling rigs. Reports that Gustav spared the Gulf of Mexico’s oil and natural gas rigs brought down the price of crude to just over $107 this morning. Oil prices haven’t reached these lows since mid-April.
The drop in oil prices was also spurred by a strengthening dollar:
Adding further pressure was the U.S. dollar, which climbed against most major currencies early Tuesday. Because crude is traded in the U.S. currency around the world, a stronger dollar puts downward pressure on oil prices. When the dollar gains, it costs foreign investors more to purchase the same amount of energy, explained Neal Dingmann, senior energy analyst at Dahlman Rose & Co.
Over the next few days energy companies will continue to asses the damage sustained to their offshore-drilling rigs. Despite sustaining less damage than predicted, Gustav, or any tropical storm of hurricane for that matter, can cause added consequence to an already weak economy:
But some economists believe that without any damage to the energy sector, the U.S. economy should be able to ride out any damage from Gustav.