Oil Prices Fall as Storm Worries Ease

NEW YORK -- Oil prices dropped Monday on expectations a strong Hurricane Dean will spare key oil and gas facilities in the Gulf of Mexico.

Light, sweet crude for September delivery on the New York Mercantile Exchange fell $1.22 to $70.76 a barrel in midday trading on the New York Mercantile Exchange. Gasoline prices dropped 9.9 cents to $1.9398 a gallon, down 4.86 percent.

Hurricane Dean, which uprooted trees and tore roofs from homes as it skirted the southern coast of Jamaica on Sunday, was expected to slam into Mexico's Yucatan Peninsula late Monday. The storm strengthened over the weekend to maximum sustained winds of 150 miles per hour and could dump up to 20 inches of rain.

The storm is a powerful Category 4, and could reach the highest level, Category 5, with maximum winds greater than 155 miles per hour later in the day, the U.S. National Hurricane Center in Miami said in its latest advisory.

"The market is reacting to the news that it doesn't look like Hurricane Dean will affect key refining facilities in the U.S. Gulf of Mexico," said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

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"But I don't think prices will fall a whole lot further because the supply-demand fundamentals for oil remain about balanced. Nothing has really changed there," he said. "Traditionally, September is the peak month for hurricanes and so the oil market faces some upward exposure going forward in the next few weeks."

The Nymex crude contract rose 98 cents to settle at $71.98 a barrel Friday on earlier forecasts that Dean would turn into the central Gulf of Mexico and threaten oil and gas installations.

Royal Dutch Shell PLC said it would evacuate 275 nonessential personnel from the Gulf, adding to the 188 evacuated before another tropical storm struck Texas last week. Chevron Corp. said it would evacuate a small number of nonessential personnel from deep water facilities, but that production would continue at normal levels.

Exxon Mobil Corp., BP PLC and Valero Energy Corp. said they are monitoring Dean, but have not yet evacuated any workers.

Concerns about the global economy have also weighed on prices in recent weeks. Friday, the U.S. Federal Reserve cut its discount rate by a half percentage point, easing some investors' fears of an economic slowdown. Energy investors worry that any cooling in the economy could mean less demand for oil and gasoline.

Heating oil futures lost 5.43 cents to $1.963 a gallon, while natural gas futures declined 6.9 cents to $6.32 per 1,000 cubic feet.

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