Tropical Storm Gustav Cause Oil Prices Rise
Oil prices swung higher Tuesday as Hurricane Gustav struck Haiti, raising concerns that the storm could slam into major oil operations in the Gulf of Mexico. However, the price rise was tempered by a stronger dollar and a report from the Energy Department showing even slower fuel demand than many traders thought.
After dropping as low as $112.36 per barrel in overnight trading, light, sweet crude for October delivery ended the day up $1.16 to settle at $116.27 a barrel on the New York Mercantile Exchange.
Gustav formed Monday and roared ashore Haiti Tuesday as a Category 1 hurricane. The storm triggered flooding and landslides that killed 23 people in the Caribbean. It weakened into a tropical storm, though it is likely to grow stronger in the coming days by drawing energy from warm open water. Gustav is the first storm of the 2008 Atlantic hurricane season to pose a serious threat to offshore oil and gas installations in the Gulf. In 2005, Katrina and Rita destroyed 109 oil platforms and five drilling rigs.
Tropical storm Gustav became a Category 1 hurricane early Tuesday as it approached Haiti's southern coast. The Miami-based National Hurricane Centre said Gustav could become a Category 2 storm with winds of 155 kilometres per hour or higher before hitting Haiti, and that Gustav will gather strength over the Gulf's warmer-than-usual waters.
Another weather forecaster, Accuweather.com, said that if Gustav passes through the Yucatan Channel into the Gulf, the storm could intensify into a Category 4 or 5 hurricane. A Category 5 hurricane is defined as having sustained winds over 250 kilometres per hour; hurricanes Rita and Katrina were Category 5 hurricanes, and shuttered most of the Gulf region's crude oil and natural gas production in the late summer and early fall of 2005.
With top sustained winds just below hurricane strength, Gustav was projected to become a major Category 3 hurricane after it passes between Cuba and Mexico and enters the warm, deep Gulf waters. Some models showed Gustav taking a path toward Louisiana and other Gulf states devastated by hurricanes Katrina and Rita three years ago. Vast areas of the Gulf lost power when Katrina struck, and utility companies say they're better prepared to respond to violent weather, but that only so much can be done.
Gustav is particularly worrisome because there are few surrounding wind currents capable of shearing off the top of the storm and diminishing its power, the hurricane center said. "Combined with the deep warm waters, rapid intensification could occur in a couple of days."
By Wednesday evening, a slightly weakened Gustav had top winds of 45 mph. It was centered some 65 miles south of Guantanamo Bay, Cuba, and traveling west at 7 mph.
A hurricane warning was in effect for parts of Cuba, including the U.S. military base at Guantanamo, where base spokesman Bruce Lloyd predicted "a really wet night."
After dropping as low as $112.36 per barrel in overnight trading, light, sweet crude for October delivery ended the day up $1.16 to settle at $116.27 a barrel on the New York Mercantile Exchange.
Gustav formed Monday and roared ashore Haiti Tuesday as a Category 1 hurricane. The storm triggered flooding and landslides that killed 23 people in the Caribbean. It weakened into a tropical storm, though it is likely to grow stronger in the coming days by drawing energy from warm open water. Gustav is the first storm of the 2008 Atlantic hurricane season to pose a serious threat to offshore oil and gas installations in the Gulf. In 2005, Katrina and Rita destroyed 109 oil platforms and five drilling rigs.
Tropical storm Gustav became a Category 1 hurricane early Tuesday as it approached Haiti's southern coast. The Miami-based National Hurricane Centre said Gustav could become a Category 2 storm with winds of 155 kilometres per hour or higher before hitting Haiti, and that Gustav will gather strength over the Gulf's warmer-than-usual waters.
Another weather forecaster, Accuweather.com, said that if Gustav passes through the Yucatan Channel into the Gulf, the storm could intensify into a Category 4 or 5 hurricane. A Category 5 hurricane is defined as having sustained winds over 250 kilometres per hour; hurricanes Rita and Katrina were Category 5 hurricanes, and shuttered most of the Gulf region's crude oil and natural gas production in the late summer and early fall of 2005.
With top sustained winds just below hurricane strength, Gustav was projected to become a major Category 3 hurricane after it passes between Cuba and Mexico and enters the warm, deep Gulf waters. Some models showed Gustav taking a path toward Louisiana and other Gulf states devastated by hurricanes Katrina and Rita three years ago. Vast areas of the Gulf lost power when Katrina struck, and utility companies say they're better prepared to respond to violent weather, but that only so much can be done.
Gustav is particularly worrisome because there are few surrounding wind currents capable of shearing off the top of the storm and diminishing its power, the hurricane center said. "Combined with the deep warm waters, rapid intensification could occur in a couple of days."
By Wednesday evening, a slightly weakened Gustav had top winds of 45 mph. It was centered some 65 miles south of Guantanamo Bay, Cuba, and traveling west at 7 mph.
A hurricane warning was in effect for parts of Cuba, including the U.S. military base at Guantanamo, where base spokesman Bruce Lloyd predicted "a really wet night."
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