Oil prices plunged to a seven-month low Monday as the Gulf Coast energy infrastructure appeared relatively unharmed after Hurricane Ike and traders bet that Lehman Brothers’ bankruptcy could ignite a massive liquidation of commodities.
Light, sweet crude for November delivery fell $5.67 to $95.64 a barrel in pre-market trading on the New York Mercantile Exchange, after earlier dropping to $94.41, the lowest level since Feb. 14.
Crude has fallen more than $50 — or 35 percent — from its all-time trading record of $147.27 reached July 11.
U.S. officials said Sunday that Ike destroyed at least 10 oil and gas platforms and damaged pipelines in the Gulf of Mexico. But that represents only a small portion of the 3,800 production platforms in the Gulf and pales in comparison to the catastrophic damaged doled out by Hurricanes Katrina and Rita three years ago.
“Fears of widespread refinery damage have been allayed considerably and a number of facilities are coming back up in a timely fashion, so that’s pressuring energy prices across the board,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Meanwhile, investors also watched the fast-unfolding events surrounding Lehman Brothers Holdings Inc. Analysts said the 158-year-old bank’s demise — along with the planned sale of Merrill Lynch & Co. to Bank of America Corp. — could prompt another sell-off in commodities as the banks and investors race to unwind positions on fears that a deepening economic crisis will further erode demand for raw materials.
“That would only add to the bearish sentiment,” Ritterbusch said. “A lot of these companies helped fuel the oil price advance and now these entities are nowhere to be seen right now.”
Also adding to the selling pressure Monday was a slightly stronger dollar. A rising greenback encourages investors to unload commodities bought as a hedge against inflation or weakness in the U.S. currency.
Clarion Ledger
9/15/8
Magnolia Tribune
