OIL PLUMMETED $4 yesterday as investors fled to safer havens due to turmoil in the US financial system and early signs Hurricane Ike had spared key US energy infrastructure.
Lehman Brothers' filing for bankruptcy protection and Bank of America's agreement to buy Merrill Lynch stirred concerns that mounting global economic problems would slow energy demand further, sending investors out of oil.
US crude dropped $4.36 to $96.82 barrel in late afternoon trading, after hitting a seven-month low of $94.13 earlier, extending a 34 per cent slide from peaks in mid-July amid mounting evidence of slowing fuel demand. London Brent crude fell $4.77 to $92.81 a barrel.
Oil companies rushed to check damage to their facilities after Hurricane Ike struck the heart of the US energy industry near Houston on Saturday, leaving a quarter of the nation's oil and refined fuel production idled.
Early indications showed no major damage to energy infrastructure, though several Texas refineries remained without power. The US department of energy said installations suffered minimal damage and were preparing to restart.
"The sell-off is partly because Hurricane Ike hasn't done significant structural damage to oil facilities, as well as growing concerns about the economy," said David Moore, commodities strategist for Commonwealth Bank of Australia.
"It has been quite a spectacular turn of events at Lehman and Merrill and the stresses in the financial system are sparking concerns about economic outlook and how that will weigh on global energy demand."
Oil had been on a six-year rally driven by surging demand from emerging economies like China, with additional support coming this year as investors rushed into oil as a hedge against inflation and the weak dollar.
But the dollar has been rebounding in recent months, and rose further yesterday.
- (Reuters)
