Dolly is headed for northern Mexico and southern Texas, and the dollar gained against the euro on signs U.S. interest rates may increase. Oil futures have declined more than 15 percent from a record $147.27 a barrel on July 11 as U.S. gasoline use fell for a 13th consecutive week.
Crude oil for September delivery fell as much as $1.77 cents, or 1.4 percent, to $126.65 a barrel, and traded at $127.17 at 3:10 p.m. Singapore time on the New York Mercantile Exchange. Futures are up 70 percent from a year ago. The August contract expired yesterday after declining 2.4 percent to $127.95 a barrel, the lowest settlement price since June 5.
The number of outstanding oil futures in New York dropped to the lowest in 17 months as oil companies, refiners and institutional investors exited the market. Open interest fell 2.6 percent July 21 to 1.23 million contracts on the Nymex, according to data from the exchange.
U.S. gasoline demand fell 3.3 percent last week from a year ago, the 13th consecutive weekly decline, as Americans react to record pump prices by driving less, a MasterCard Inc. report yesterday showed.
Gasoline for August delivery fell 2.11 cents to $3.1259 a gallon in New York at 12:20 p.m. Singapore time. Yesterday, it dropped 7.01 cents, or 2.2 percent, to $3.147, the lowest close since May 8. Futures reached a record $3.631 a gallon on July 11.
Pump prices are following changes in futures. Regular gasoline, averaged nationwide, fell 1.4 cents to $4.055 a gallon, AAA, the nation's largest motorist organization, said yesterday on its Web site. Pump prices reached a record $4.114 a gallon on July 17.
Dolly strengthened over the Gulf of Mexico and became a hurricane. Offshore fields in the Gulf are responsible for about 25 percent of U.S. oil production. Sustained winds strengthened to 80 miles (1,320 kilometers) per hour, the U.S. National Hurricane Center said in an advisory at 10 p.m. Houston time.
The storm is traveling northwest and the eye is expected to make landfall about midday tomorrow.
Oil producers shut about 4.7 percent of production in the U.S. Gulf of Mexico, as they evacuated personnel from 49 platforms and six rigs in preparation for the storm, the government's Minerals Management Service said yesterday.
U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita shut refineries and platforms as they struck the Gulf of Mexico coast in August and September 2005. Katrina shut 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the hurricanes.
Brent crude oil for September settlement fell as much as $2.45, or 1.9 percent, to $127.10 a barrel on London's ICE Futures Europe exchange. It was at $128.35 a barrel at 3:12 p.m. Singapore time.