Oil rises as Dolly heads for Texas

Reuters
Tuesday, July 22, 2008

Oil rose a dollar on Tuesday, supported by a storm heading to the southwest United States, but analysts said it was still too early to say whether last week's record price slide was over.

Tropical Storm Dolly looked likely to miss major offshore U.S. oil and gas installations, easing fears of supply disruptions from the first big storm threat of 2008.

But forecasters still expected it to grow into a hurricane before hitting land near the Mexican border and said it could threaten some coastal refineries later in the week.

"Barring a veer north, the risks of an oil price disturbing event are low," Citi analysts said in a research note.

U.S. light crude for August delivery rose 99 cents to $132.03 a barrel by 0823 GMT, after gaining more than $3 a barrel on concerns over Dolly in the previous session. London Brent crude rose $1.03 to trade at $133.64.

Growing worries over the health of the U.S. economy led last week to the largest oil price fall ever in dollar terms, sending crude down more than 12 percent from the July 11 high of over $147.

Simon Wardell of Global Insight in London said it was still not clear whether the slide was finished, or whether a falling market was just pausing before driving prices further down.
"It did fall an awfully long way so some people may be putting more money in," he said. "It might be a pause, it might be a part of a rebound.

"It's probably a question of holding right now until some data comes out. If the U.S. inventory data looks a lot better again then I think there's a chance that prices could come down further."

A Reuters poll of analysts ahead of Wednesday's weekly U.S. government inventory data forecast it would show crude stocks fell by 500,000 barrels, after unexpectedly rising 3.0 million barrels in the previous week.

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