Oil fluctuates around $113 as storm threat eases

Tuesday August 19, 11:46 am ET By Stevenson Jacobs, AP Business Writer
Oil prices fluctuate around $113 a barrel as supply concerns over Tropical Storm Fay ease
NEW YORK (AP) -- Oil prices fluctuated Tuesday, hovering near $113 a barrel after the dollar weakened and Tropical Storm Fay missed offshore oil and gas installations in the Gulf of Mexico.
At the pump, retail gas prices continued to fall, suggesting that cash-strapped Americans are still cutting back on their driving. A gallon of regular slipped another penny overnight to a new national average of $3.73, almost 10 percent lower than record prices of $4.114 a gallon reached July 17, according to auto club AAA, the Oil Price Information Service and Wright Express.
Fay, the sixth named storm of the 2008 Atlantic hurricane season, swept over southwest Florida early Tuesday, bringing heavy rain and wind but staying well clear of oil and gas platforms scattered across the Gulf. The storm was moving to the north and was expected to gradually weaken during the day. Fay steamed through the Caribbean over the weekend and was blamed for at least 14 deaths in Haiti and the Dominican Republic.
Royal Dutch Shell PLC said the storm no longer threatened its oil facilities in the Gulf and that it had begun redeploying 425 evacuated workers.
Light, sweet crude for September delivery rose 40 cents to $113.27 in morning trading on the New York Mercantile Exchange, after alternating between positive and negative territory earlier in the day. The September contract expires Wednesday, adding to the volatility. On Monday, crude closed below $113 a barrel for the first time since May 1 as traders became assured that Fay wouldn't disrupt offshore oil production.
"We dodged a bullet with the storm so that's leading to some selling," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
But other traders were buying oil contracts after the dollar weakened slightly against the euro. A falling greenback encourages buying among investors seeking commodities like oil as a hedge against inflation or weakness in the U.S. currency.
Still, analysts said the fact that even slightly bullish news such as the storm or ongoing tensions in Georgia didn't send prices significantly higher shows how much the market sentiment has changed from only a few weeks ago.
Oil prices have shed about $35, or 24 percent, from their all-time trading record $147.27 reached July 11 amid mounting evidence that a cooling global economy and high fuel costs are curtailing demand for energy.
"If this storm had happened a couple of weeks ago, it would have driven prices higher. The momentum of this market is definitely on the downside as people realize that demand is very soft," Flynn said.
Olivier Jakob of Petromatrix in Switzerland, however, said it was too early to assert that oil prices had reached a bottom, "especially since there is a clear lack of buying momentum."
Regarding oil fundamentals, Jakob said it was worth keeping an eye on how China's import of oil products will develop after the buildup of stocks for the Beijing Olympics. Reports of lower demand there could put further downward pressure on prices.
A bearish forecast on Friday from the Organization of the Petroleum Exporting Countries of lower global oil demand growth also helped keep oil prices in check.
In its monthly report, OPEC forecast that the world's daily appetite for oil this year would grow by 1 million barrels, a reduction of 30,000 barrels a day from its previous estimate. It predicted growth for 2009 will be 900,000 barrels a day, the lowest growth in world demand since 2002.
Analysts said uncertainty over the conflict between Russia and Georgia will support oil pricing. Russia has begun withdrawing troops, but U.S. officials said Moscow has positioned missile launchers in the separatist South Ossetia province.
In other Nymex trading, heating oil futures rose 1.91 cents to $3.1039 a gallon, while gasoline prices rose 1.08 cents to $2.826 a gallon. Natural gas futures added 12 cents to $8.008 per 1,000 cubic feet.
In London, October Brent crude rose 13 cents to $112.05 a barrel.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.