Oil Prices Continue to Slip

The price of oil has fallen to a seven month low of less than $97 today, as refineries along the Gulf of Mexico coast escaped major damage from Hurricane Ike and Lehman Brothers Holdings Inc. filed for bankruptcy.

Refiners reported no major damage after Ike struck the Houston area, home to more than 20 percent of U.S. refining capacity, and said preparations are under way to restart plants.

Investment bank Lehman Brothers Holdings Inc. filed for bankruptcy, raising concern a worsening credit crisis will slow the economy and cut fuel demand. ICE Futures, the exchange for Brent oil, suspended Lehman's access to the exchange.

"The oil sector has escaped a nightmare scenario here,'' said Rob Laughlin, senior broker at MF Global Ltd. in London. "There has been very little structural damage to onshore oil operations and I expect production to start cranking up during the week.''

Crude oil for October delivery fell as much as $4.87, or 4.8 percent, to $96.31 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since Jan. 22. The contract was at $96.80 at 10:56 a.m. in London.

Crude has declined 33 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduce energy demand.

A total of 14 Texas and Louisiana refineries, with combined crude processing capacity of 3.57 million barrels a day, are shut because of Ike.

Brent crude oil for October settlement fell as much as $4.74, or 4.9 percent, to $92.84 a barrel on London's ICE Futures Europe exchange. It was trading at $93.37 a barrel at 10:47 a.m. in London. Prices have tumbled 13 straight days.

Valero Energy Corp, the largest U.S. refiner, said it found no significant structural damage at three Houston-area refineries shut before the storm.

Exxon Mobil Corp. said its Baytown refinery, the largest in the U.S., has power and damage appears "limited,'' while it is checking its Beaumont, Texas, plant, which is without power.

Royal Dutch Shell Plc said it was assessing its Texas plants and it was too early to say when they will restart.

ConocoPhillips said its Sweeny, Texas refinery has power and its condition is being assessed. LyondellBasell Industries' Houston refinery will be down for at least several days,'' said David Harpole, a company spokesman. Marathon Oil Corp. and Motiva Enterprises LLC said they were evaluating their plants.

Hedge-fund managers and other large speculators cut their net-long position in New York crude-oil futures in the week ended Sept. 9, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 6,336 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 7,995 contracts, or 56 percent, from a week earlier.

Author: Jo Amey