Oil prices fell back toward a five-month low this morning, resuming a near two-week slide as a resurgent US dollar drove investors away from commodities and OPEC appeared set to sit tight on production policy.
Concerns over another hurricane seen strengthening in the oil-rich Gulf of Mexico were countered by the greenback's surge to a one-year peak against a basket of currencies after the US government's takeover of troubled mortgage financiers.
US crude for October delivery fell $1.18 to $105.16 a barrel by 3.40am, nearly hitting yesterday's five-month low of $104.70 a barrel as it resumes a slump that has shaved more than 10 percent off prices since August 27th.
London Brent crude fell 88 cents to $102.56 a barrel, threatening to dip back into double-digit territory for the first time since early April.
The dollar's surge to its highest level against the euro since October 2007 prompted traders to shed commodity positions, extending a slump in commodities from corn to copper and dulling the oil market's reaction to a pair of major hurricanes.
"If it weren't for the hurricanes, oil should be below $100 a barrel, considering the sentiment," said Tetsu Emori, fund manager at Astmax Co Ltd.
Energy companies began shutting production on Monday as Hurricane Ike threatened to cross the U.S. offshore oil patch before output shut by Hurricane Gustav last week could be restored.
"Although seemingly very disruptive events, neither of these storms is playing much of a role in setting a more bullish direction," First Energy Capital said in a report.
The dual outages are likely to trigger a serious drain on US inventories. US crude stocks likely fell by 4.3 million barrels in the week to September 5th after Gustav shut down fields, according to a preliminary Reuters poll of analysts.
Gasoline stocks were seen falling by 4.2 million barrels and distillates by 2.5 million barrels in the data due tomorrow.
Ahead of OPEC's meeting later today, Saudi-owned newspaper al-Hayat quoted a senior OPEC source saying cutting oil output now would be "unjustified" given the approach of peak winter demand.
