Crude oil prices rose on Thursday as Mexico took stock of its oil rigs and ports following Hurricane Dean, though gains were capped by continued worries in the US housing market. Hurricane Dean, which weakened rapidly after slamming into Mexico's Gulf Coast on Wednesday, shut 80 percent of Mexico's crude production, killed five people and sent thousands of others into shelters.
Mexican oil monopoly Pemex, one of the top three suppliers of oil to the United States, said Wednesday it hoped to resume full production by next week but was still not sure if the industry had sustained significant damage. Port officials said on Thursday that two of the country's three main Gulf oil ports had reopened. US crude prices settled up 57 cents to $69.83 a barrel, while London crude rose $1.16 to $69.86 a barrel.
US oil had briefly leapt over $70 earlier in the day, but gains were clipped after the head of the United States' biggest mortgage lender, Countrywide Financial Corp, said the US home loan market was not improving. The US subprime loan crisis has spread to other markets in recent weeks and oil has been hit as investors, fearing a credit squeeze, have sold to raise cash.
Thursday's remarks by Countrywide Chief Executive Angelo Mozilo in a television interview with CNBC appeared to undermine fragile market confidence. "There is a very serious situation going on" in the US housing market, Mozilo said. "This environment is certainly not getting better."
US stocks fell after the remarks. The Dow Jones industrial average turned negative while the Standard & Poor's 500 Index extended losses. In Europe, the FTSE 100 index and FTSEurofirst 300 gave up their gains. Barclays Capital analysts said they believed the fallout from US subprime loans should have little impact on energy, however, beyond prompting the unwinding of some long speculative positions to release cash.
"Our view ... is that, once the current state of uncertainty lessens, the actual scale of the effect of subprime on global commodities balances is likely to be very limited, particularly in those markets, such as oil, that are primarily being driven by increasing levels of supply-side dysfunctionality," the bank said in a research note.
But Peter Beutel, president and oil analyst at Cameron Hanover in Connecticut, sounded a note of caution. "Open interest has dropped in the last four trading days to Wednesday. We don't see funds rushing to embrace previous levels of risk right away," he said. Adding support to oil prices was a surprise decline in US gasoline stockpiles last week of 5.7 million barrels, reported by the US Energy Information Administration.
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