Oil Prices Near $127 On Passed Over Storm

Crude oil traded near $127 a barrel in New York after a storm missed Mexico's biggest oilfield, and on speculation a U.S. probe into futures trading has reduced investor interest in buying the commodity.

Arthur, the first tropical storm of the Atlantic hurricane season, has weakened to a depression and missed Mexico's Cantarell oilfield by remaining on land. Hedge-fund managers and speculators reduced bets on higher oil prices by 80 percent since July as crude reached records and U.S. regulators started investigating trading, government data show.

Crude oil for July delivery fell 43 cents, or 0.3 percent, to $126.92 a barrel at 1:37 p.m. Singapore time in electronic trading on the New York Mercantile Exchange. It gained 73 cents, or 0.6 percent, to settle at $127.35 a barrel on May 30.

Nymex crude futures reached a record $135.09 on May 22. Prices, which have surged 92 percent in the past year, fell 3.7 percent last week, the biggest weekly drop since March. Oil has gained 33 percent this year as a 6.6 percent drop in the dollar versus the euro made commodities including crude more attractive for buyers in other currencies.

By remaining over land, Arthur missed the Bay of Campeche and its Cantarell oilfield, where Petroleos Mexicanos, or Pemex, pumps 1.07 million barrels a day of oil.

Earlier forecasts by the U.S. National Hurricane Center showed the storm could strengthen over the Bay of Campeche.
Pemex, the third-largest oil supplier to the U.S., shut export terminals at the ports of Dos Bocas and Cayo Arcas in the Gulf of Mexico as Arthur brought heavy winds and rains, according to a statement on the Web site of Mexico's Merchant Marine.

Arthur, the first tropical cyclone of the year in the Caribbean, had winds of 56 kilometers an hour (35 miles an hour) and was moving to the west-southwest at 9 kilometers an hour as of 5:30 p.m. local time, the Merchant Marine said in a separate statement. It was centered over land 128 kilometers southeast of Isla del Carmen.

The storm will lose its status as a tropical depression as higher terrain breaks up its rotation, with winds dropping to 46 kilometers an hour before dawn, the U.S. National Hurricane Center said in a statement at 5 p.m. Miami time.

Brent crude oil for July settlement was at $127.50 a barrel, down 28 cents, on London's ICE Futures Europe exchange at 1:39 p.m. Singapore time after earlier falling to $127.22 a barrel. The contract touched a record $135.14 on May 22.

Oil prices declined last week after an Energy Department report showed U.S. fuel consumption the previous week fell from a year earlier.

So-called speculative net-long positions fell to 25,867 contracts on the New York Mercantile Exchange in the week ended May 27 from a record 127,491 on July 31, according to a U.S. Commodity Futures Trading Commission report on May 30.

Scrutiny of the oil market increased as the U.S. Congress held hearings May 22 and oil soared to a record $135.09 a barrel the same day, threatening economic growth.
The CFTC, under pressure from Congress, said May 29 it was investigating the doubling of oil prices the past year and said it will consider giving more detail on the types of oil investors and their holdings.