Friday, June 25, 2010

Crude Oil Advances on Concern Storm May Disrupt Gulf of Mexico Production

Crude oil rose the most in two weeks in New York on concern the first tropical storm of the hurricane season may form and disrupt production in the Gulf of Mexico. The gain accelerated as the dollar weakened against the euro. Oil climbed as much as 3.4 percent after the National Hurricane Center said that a low pressure area located in the Caribbean off Honduras and Grand Cayman has a 70 percent chance of developing into a tropical cyclone this weekend and may head into the Gulf.

“We always see knee jerk reactions when storms enter the Gulf, and there are concerns that storms will damage either offshore or onshore infrastructure,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. Crude for August delivery gained $2.12, or 2.8 percent, to $78.63 a barrel at 1:14 p.m. on the New York Mercantile Exchange, the biggest percentage gain since June 9. Oil rose as high as $79.11. The contract has increased 0.5 percent this week.

The euro was up 0.2 percent at $1.2355 at 1:17 p.m., after falling as low as 1.2254. A lower U.S. currency versus the euro bolsters the appeal of crude as an alternative investment. “The dollar is weakening and it seemed to give crude a little boost,” said Phil Flynn, vice president of research at PFGBest in Chicago. The low pressure area is likely to become a tropical depression before it reaches the Yucatan Peninsula, and the system may become a tropical cyclone during the next 48 hours, the hurricane center said at 8 a.m. Miami time today.

About 31 percent, or 1.69 million barrels a day, of U.S. oil production comes from federal waters in the Gulf of Mexico, according to the Energy Department.....Read the entire article.

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