Commodity Daily News

Oil is Up As Gustav Threatens to Hit the Gulf of Mexico.

Crude Oil rose more than $2, including a high above $119.5, during yesterday's trading session, leveling off at $118.

Speculation continues regarding the severity of tropical storm Gustav, as many believe it will be the worst regional disaster since Hurricane Katrina. As Gustav maintains its path toward the production platforms in the Gulf of Mexico, the sensitivity of oil prices will grow and bring more volatility to the market. This may hold a major threat to the U.S Oil companies since their main platforms and pipelines are located primarily in the Gulf of Mexico. If the situation will continue to deteriorate it may have an impact on the Oil production in general. Meanwhile the companies in Gulf are carrying on with the production, till Friday's prognoses on storm developments. The future Oil production in the Gulf of Mexico depends now on how hard Gustav will hit the coast. In the event of any threatening behavior, all of the Oil platform workers will have to be evacuated and prices will likely jump.

In addition The Energy Information Administration announced yesterday that Crude Oil inventories fell slightly by 0.1M barrels to 305.8M barrels, comparing to the 0.9M increase forecasted, thus causing a further increase in Oil prices.