Oil prices fell $5 a barrel to a six-week low on Tuesday as dealers anticipated a tropical storm moving over the Gulf of Mexico would miss most major oil and gas installations offshore. The losses come after the biggest weekly price decline in oil's history last week, which chopped $17 off the cost of a barrel as the market focused on mounting US economic troubles and sliding demand.
"Dolly passing and recognition of deteriorating global economic conditions," said Mike Fitzpatrick, vice president at MF Global, commenting on crude's slide. US crude futures fell $4.39 to $126.65 a barrel by 1700 GMT after dipping as low as $125.63 - the lowest level since early June. London Brent was off $4.06 at $128.55. Oil remains nearly 30 percent higher than at the start of this year, and more than six times higher than in 2002, in a rally driven by startling growth in China and other developing Asian economies.
Tropical Storm Dolly, which is expected to become a hurricane within two days before hitting the coast near the border of Mexico and Texas, has so far triggered only minor production shutdowns from offshore oil platforms. Exxon Mobil Corp and Anadarko said on Tuesday they trimmed output slightly as a precaution against the high winds and seas, and other companies said they were evacuating workers in the path of the storm. But oil traders and analysts said the overall effect of Dolly on the oil patch would likely be very light.
"Barring a veer north, the risks of an oil price disturbing event are low," Citi analysts said in a research note. Hurricanes in 2005 temporarily knocked out a quarter of US crude oil production and refining capacity, sending oil prices to then-record highs.
Oil's slide has taken it about 14 percent below the July 11 peak of more than $147 a barrel, with traders eyeing growing stockpile levels and slumping demand for gasoline in the United States in response to high prices. The next set of government data on US oil inventories, for release on Wednesday, was expected to show crude stocks had fallen by 700,000 barrels, according to a Reuters poll of analysts. Crude stocks unexpectedly rose in the previous week by 3.0 million barrels, helping to drive oil prices lower.
The market appeared little affected by reports of a halt of exports from Iraq's northern fields through Turkey due to a legal dispute and a delay of several days in Iraqi shipments from the southern port of Basra due to shipping congestion.
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