Oil falls below $79 as Ida drops to tropical storm

AFP

SINGAPORE: Oil prices drifted below $79 a barrel Tuesday in Asia as a storm threatening oil installations in the Gulf of Mexico weakened and investors eyed a volatile dollar.

Benchmark crude for December delivery was down 49 cents to $78.94 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

Tropical Storm Ida weakened Monday from a hurricane as it neared Gulf Coast oil facilities, easing concern it could disrupt supply when it reaches land later Tuesday.

"Damage to production facilities is expected to be minimal and personnel evacuation from offshore rigs is expected to prove temporary," said Galena, Illinois-based Ritterbusch and Associates in a report.

The contract rose $2 to settle at $79.43 on Monday as the dollar weakened, making crude cheaper for investors with other currencies.

The euro, which broke above 1.50 on Monday, fell to 1.4978 in early Asian trading from 1.4991 the previous day while the dollar was steady at 89.97 yen.

While U.S. stock markets rose to their 2009 highs Monday on investor optimism about the global economic recovery, oil is still below its peak for the year of $82 on concern growing U.S. unemployment will undermine demand.

"It does appear that the rising unemployment rate is casting a larger shadow over domestic petroleum consumption than had previously been the case," Ritterbusch said.

In other Nymex trading, heating oil fell 1.46 cents to $2.05 a gallon. Gasoline for December delivery dropped 1.63 cents to $1.97 a gallon. Natural gas for December delivery slid 4.8 cents to $4.62 per 1,000 cubic feet.

In London, Brent crude for December delivery rose 44 cents to $77.33 on the ICE Futures exchange.