Oil prices dip below US$59

12-Jul-05

As Hurricane Dennis passed by harmlessly, perceived to have caused minimum damage to US oil and gas facilities, global crude oil prices, hovering at US$60 for almost a week, fell on Monday. US crude for August delivery dropped to about US $58.50 a barrel down from last week's record of about US $62.10. London Brent crude also fell to about US $57.01 a barrel. Hurricane Dennis raced ashore on the US Gulf Coast on Sunday, but did not have a very damaging effect on the production companies that are in the process of restoring about 42% of Gulf oil supply and about 27% of natural gas output that were shut as a precaution. Another factor contributing to the dip is Chinese demand growth that seems to be lending less support to oil markets. China, the world's second biggest energy consumer after the United States and one of the main drivers of last year's oil price rally, is seeing a sustained slowdown in oil demand growth. Triggered by slowing demand and retail price caps that prompted refiners to cut processing rates and fall upon domestic inventories, June saw a dip in crude imports into China from last years 2.74 million bpd to 2.7 million bpd this year. This follows a 4% contraction in oil demand in May from a year ago levels. Driven by the erratic monsoon and higher global crude prices, inflation in India is anticipated to grow 5.7% in the current fiscal ending March 2006