Hurricane Gustav approaches the Gulf of Mexico: oil prices rise by a dollar

27-Aug-08

Hurricane Gustav has struck Haiti, and is fast approaching the Gulf of Mexico, increasing concerns of production and supply disruption in major oil operations in the Gulf of Mexico. The Miami-based National Hurricane Center said Gustav could gather strength over the Gulf's warmer-than-usual waters. As per another forecast, if Gustav passes through the Yucatan Channel into the Gulf, it could intensify into a Category 4 or 5 hurricane - Hurricanes Rita and Katrina were Category 5 hurricanes. After dropping to lows of US$112.30 per barrel; light, sweet crude for October delivery settled at US$116 on the New York Mercantile Exchange. The dollar's advance against the euro, yen and pound has exerted a dampening effect on oil's jump. Many investors buy commodities as a hedge against inflation and weakness in the US currency, so oil prices often fall when the dollar strengthens. Prices were also dampened on a report by the EIA showing that yoy oil demand was down 5.6% in June.