Commodity Daily News

Hurricane Threat Delays Oil Reproduction from the Gulf of Mexico.

The price on crude oil starts to escalate after nearly a five month's decline. The oil reserves of the Gulf of Mexico are been threatened once again by an upcoming hurricane. Crude oil is traded at $108.95 a barrel, an increase of 2.6%. The Gulf of Mexico, the biggest offshore producing region in the U.S, hasn't recuperated yet from Hurricane Gustav. Oil production hasn't been fully resumed and now a new hurricane, Hurricane Ike, will shut down the refineries again for at least another week. The National Hurricane Center projects the hurricane to move into the Gulf in the next two days at Category 3. So far it is still unclear what will be the size of damage to the oil refineries from the hurricane. Oil companies are concerned that they will have to stop the oil production again as a result of a new hurricane coming near the Gulf.
Hurricanes are not the only events that investors are preoccupied with. The recent news that the U.S government has taken over Fannie Mae and Freddie Mac, the nation's biggest home loan companies weakened the dollar. Since the dollar and crude oil prices are closely interwoven, the decrease of the U.S currency affects the trade of oil directly. Though for the long run the federal takeover is designed to stabilize the U.S financial market, for now the market appears to be uncertain regarding its long term outlook As a result of the dollar's instability, oil prices continues to swing. For the next few days the traders will continue to closely watch the Hurricane Ike's development in the Gulf which will have an impact on the price of crude.