Oil drops as storm wanes as threat

DALLAS | Crude oil prices fell to a 13-week low Monday amid speculation that Tropical Storm Edouard will miss most offshore oil facilities as it approaches the coast of Texas.

Futures fell as much as $5.60 a barrel, shrugging off port closings and rig evacuations in the Gulf of Mexico, as well as a fire at Valero Energy Corp.’s Houston refinery and signs of a threat to oil supplies from Iran, the Organization of Petroleum Exporting Countries’ second-largest producer. Edouard was on course to make landfall in Texas on Tuesday morning.

“A market that can’t rally on bullish news is a bear market,” said Tim Evans, an energy analyst for Citi Futures Perspective in New York. “All of these bullish stories are not pushing the price higher.”

Crude for September delivery fell $3.69, or 3 percent, to settle at $121.41 a barrel on the New York Mercantile Exchange, the lowest close since May 5. Lower demand for fuel in the U.S. has pushed the futures down more than $25 a barrel, or 18 percent, from the record $147.27 set July 11.

While Edouard may pass close to Exxon Mobil Corp.’s Baytown oil refinery as well as BP PLC’s Texas City plant, producers have idled less than 1 percent of oil output and 7.2 percent of natural gas production in the Gulf because of the storm, the U.S. Minerals Management Service said.

“A lot of the fear about something really affecting those rigs appears to have slackened,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Conn. “The threat is that there’s a large enough amount of rainfall that those refineries could be affected for a while.”

Also Monday, Democratic presidential candidate Sen. Barack Obama called on the U.S. government to release crude oil from the Strategic Petroleum Reserve to help drive down gasoline prices.

Gasoline for September delivery lost 8.41 cents, or 2.7 percent, to $3.0002 a gallon on the Nymex after touching $2.9704 a gallon, the lowest since May 5. Futures fell 13 percent last month, the biggest drop since September 2006.

Regular gasoline at the pump, averaged nationwide, fell 0.6 cent to $3.881 a gallon, AAA said Monday. Pump prices reached a record $4.114 a gallon July 17 as higher prices curbed demand.

News about the storm and Iran testing a new anti-ship weapon this weekend “would have had the market up $5 three months ago, said Kyle Cooper, an analyst at IAF Advisors in Houston. “The fact that it hasn’t does indicate some shift in psychology.”