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ADRL - New Contract In United Kingdom: Drilling Of Gas Storage Caverns


Ability Drilling AS Date: 6 August 2008

New contract in United Kingdom: Drilling of gas storage caverns

Ability Drilling has been awarded a contract with an estimated value of NOK 100 million for drilling of gas storage caverns with Scottish and Southern Energy plc ("SSE"). The contract is for drilling operations related to the Aldbrough Gas Storage Project II, Eastern York. The project is a 50/50 joint venture between SSE and StatoilHydro.

The Aldbrough Gas Storage Project II is the second project for storage of natural gas underground in the area by the two companies. The development of the gas storage area was started in 2002, and the actual project is the second phase of the total development. The contract covers drilling of nine wells, which will subsequently be leeched to caverns (so far not part of the contract). The leaching contract will be awarded during drilling of these 9 wells. The caverns will have a storage capacity of 420 million cubic metres. This equals to the supply of gas in one day to more than 6 million homes. Ability Drilling's operations in this project will commence in Q4 2009 and will last for approximately two years with one rig.

CEO in Ability Drilling Hans Petter Eikeland comments: "We are proud to be awarded this important contract with such a well-reputed company as Scottish and Southern Energy. It is also a pleasure for the management and crew in Ability Drilling to again work with StatoilHydro, who we know very well from the Norwegian Continental Shelf".

Gas storage is a central part of the UK's strategy for handling more imports of gas. It secures the required flexibility in reserves for the country. Strategically, gas storage also increases energy independence. Other countries also evaluate development of more gas storage caverns. Says Mr. Eikeland, "we experience growing interest for the storage concept and believe this market will grow rapidly."

The gas storage caverns are created using well known and proven technology and drilling processes. Directional drilling is used from a central area down to the salt strata. In Aldbrough, this area is about 1700 metres underground. After drilling is completed, the leaching process starts by pumping seawater into the boreholes to dissolve the salt and form the cavern. The natural gas will then be pumped into the caverns and stored under high pressure.

"Some of Ability Drilling's competitive edges, high focus on QHSE and more environmental friendly operation, were crucial in winning this contract," says Mr. Eikeland, who expects the contract will pave the way for new opportunities in the gas storage market.

For further information, please contact:

CEO Hans Petter Eikeland, phone +47 56 32 43 43, or +47 93 20 81 77 CFO Kenneth Tunes, phone +47 56 32 43 43, or +47 91 54 49 01

About Ability Drilling ASA: Ability Drilling aims to become the preferred operator and provider of Rack & Pinion (R&P) rigs in its defined core markets, by combining fourth generation drilling technology with outstanding drilling experience from offshore North Sea exploration and production activities.

The Company currently targets onshore oil operations in the MENA (Middle East North Africa) market, the geothermal market in Europe, as well as the market for drilling of LNG reservoirs. Both the land rig market in MENA and the geothermal segment in Europe are markets with strong growth and significant potential, while the market for drilling of LNG reservoirs is an emerging growth segment. Ability Drilling targets extension of the geographical footprint within all current focus areas.

Ability Drilling has already ordered 11 rigs, of which 10 rigs are still under construction. In addition, the company has options for 33 additional land rigs and 40 additional workover rigs. Ability Drilling's target is to have 20 rigs in operation within 2010.

Ability Drilling is listed on Oslo Axess, with ticker ADRL.

Ability Drilling AS

http://www.ability-drilling.com/

Business, 8/7/2008 11:52 AM August 7, 2008
World oil prices move up slightly in Asian trade

Agence France-Presse

SINGAPORE - Oil prices were slightly higher in Asian trade Thursday after steep falls in recent sessions on worries about waning energy demand, especially in the United States, dealers said.

In morning trade, New York's main contract, light sweet crude for September delivery, rose 30 cents to 118.88 dollars a barrel.

London's Brent North Sea crude for September delivery added 45 cents to 117.45.

"I think it's partly that it has been such a big sell-off (in recent sessions)," said Jason Feer, from energy market analysts Argus Media in Singapore.

Oil prices have tumbled this week on new concerns about demand amid signs of slowing global growth. Crude is down almost 20 percent since reaching record highs above 147 dollars last month.

Prices fell Wednesday after an unexpected jump in US crude reserves but a bigger-than-expected drop in gasoline stockpiles was the other surprise element for the market.

The US Department of Energy announced in its weekly report Wednesday that American crude reserves increased by 1.7 million barrels in the week ended August 1.

The reading caught the market off guard because expectations had been for a 200,000-barrel decline. The weekly report often has an impact on market prices.

Motor fuel stockpiles plunged 4.4 million barrels, well beyond consensus forecasts for a drop of 1.5 million.

"The gasoline numbers have probably raised enough doubts in traders' heads... they probably want to see some more data to see if that is the trend," said Feer.

Traders are closely tracking the level of US gasoline stockpiles amid the ongoing peak-demand summer driving season, when many Americans take to the roads for their holidays

Oil dips to near $119 on stronger dollar
Staff and agencies
08 August, 2008




By ALEX KENNEDY, Associated Press Writer 13 minutes ago

SINGAPORE - Oil prices dropped to near $119 a barrel Friday in Asia as a strengthening dollar and worries about economic growth offset supply concerns over Turkish pipeline sabotage that was claimed by Kurdish rebels.

The gains Thursday in the U.S. came after pro-Kurdish news agency Firat said the separatist group Kurdistan Workers Party, known as PKK, admitted sabotaging the Turkish section of the critical Baku-Tbilisi-Ceyhan pipeline earlier this week.

But the dollar has also strengthened against the euro and yen after the European Central Bank and the Bank of England both left their benchmark interest rates unchanged under conflicting pressure from higher inflation and mounting concern about economic growth.

The central banks actions fed investors sentiment that economic growth is slowing in the developed world, cutting demand for crude, said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.

In London, September Brent crude was down 84 cents at $117.02 a barrel on the ICE Futures exchange.

"The disruptions to that pipeline have provided some support to oil prices," Moore said.

Nymex front-month crude futures are down about 18 percent from a record high of $147.27 hit on July 11.

Oil prices turn bearish, but bulls may yet return

9 Aug, 2008, 1000 hrs IST, AGENCIES

NEW YORK: In less than a month crude oil, which some saw hitting $200 a barrel by year-end, has plunged $32 but a rebound could happen, for example, over the Iranian nuclear crisis, analysts say.

From a record-high $147.27 on July 11, the New York futures contract slid to about $115 on Friday, losing almost 22 per cent in the course of four weeks.

In its wake, most other commodity prices, which were driven higher by the oil market surge, have fallen from their peaks: an ounce of gold has dropped to 800 dollars from 1,000; farm commodity prices are between 25 and 40 per cent lower and gasoline prices have dropped about 6.0 per cent.

"Oil is at a tipping point. It is an exaggeration to cry that a bubble has burst. It is a break," said Ellis Eckland, an independent analyst based in Chicago who insisted the "oil market was not in a bubble."

For James Williams at WTRG Energy, the law of supply and demand reins. "The market is simple reflecting the fundamentals of supply and demand. Markets participants are considering the world slowdown, the deterioration in expectations for the growth worldwide," Williams said.

Russian warships are deployed near ports along the Georgian Black Sea coast, including Poti, where Georgian officials say wheat and fuel shipments are being blocked. Russia insists there are no plans to stop oil exports, but says it reserves the right to search any ships. Later reports say the warships have been withdrawn.

UPDATE 1-Oil rises towards $116 on military conflict in Georgia
Mon Aug 11, 2008 6:09am Oil up on fighting between Georgia and Russia

* Shipments of oil and oil products from two Georgia ports suspended, according to a report


By Fayen Wong

PERTH, Aug 11 (Reuters) - Crude oil rose towards $116 a barrel on Monday, rebounding from the previous session's $5 decline on concern fighting between Russia and Georgia could disrupt energy exports from the Caspian region.

U.S. light crude for September delivery CLc1 was up 51 cents at $115.71 a barrel by 0026 GMT, after rising as much as $1.19 earlier.

The contract had finished $4.8 lower at $115.20 a barrel on Friday, before falling to $114.90 in post-settlement trade, the lowest level since early May.

Oil has shed about $31, or 21 percent, since its peak of over $147.27 struck on July 11 on concerns of a slowdown in demand.

London Brent crude LCOc1 rose 66 cents to $113.99 on Monday. Continued...

http://in.reuters.com/article/oilRpt/idINSYD9643720080811

Georgia, oil and gold
Published: August 11 2008 19:17 | Last updated: August 11 2008 19:17

War, what is it good for? Neither oil nor gold is the surprising answer. The explosion of the South Ossetian powder keg should have sent crude and gold prices soaring. Instead, both are down 4 per cent since Thursday. This is odd. Gold rises on geopolitical frisson. And Georgia is a transit route for Caspian oil to Europe.

Why are oil bulls and goldbugs so quiescent? With oil consumption falling in North America and recessionary signals coming from Europe, weak demand trumps geopolitics. Moreover, one of the pipelines crossing Georgia was shut down already and that had failed to support oil prices even before the shooting started.

EDITORS CHOICE
Explorers struggle to secure growth funding - Aug-10In depth: Oil - Apr-29Wildcatters come up to scratch - Jul-28Shell leads as big oil raises R&D by 16% - Jul-28Oil innovation after years of caution - Jul-28Brown seeks US support for action on prices - Jul-24

Oil falls to USD 114.45 a barrel


Oil prices tumbled on Monday, August 11 on worries about slowing global demand and a stronger dollar.

Light, sweet crude for September delivery fell 75 cents to settle at USD 114.45 a barrel on the New York Mercantile Exchange (NYMEX).

Gasoline futures fell 2.08 cents to settle at USD 2.8666 a gallon. The retail price of a gallon of regular gas stood at USD 3.81.

Heating oil futures fell 0.85 cent to settle at USD 3.1195 a gallon at the NYMEX.

In London, Brent crude futures fell 66 cents to settle at USD 112.67 a barrel on the ICE Futures exchange.

Natural gas futures rose by 10.1 cents to USD 8.349 per 1,000 cubic feet.

Oil steady near $113 ahead of inventory data
By ALEX KENNEDY 6 hours ago

SINGAPORE (AP) Oil prices were steady near $113 a barrel Wednesday in Asia ahead of weekly oil and gasoline inventory data that may show further evidence of declining crude demand in the U.S.

The U.S. Energy Department's Energy Information Administration was to report on U.S. oil stocks for the week ended Aug. 8 later in the day. The petroleum supply report was expected to show that crude stocks rose by 500,000 barrels, according to the average of analysts' estimates in a survey by energy research firm Platts.

Light, sweet crude for September delivery rose 7 cents to $113.08 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract dropped $1.44 overnight to settle at $113.01 a barrel.

Investors "have taken profits as they've seen demand destruction in the U.S. and they're seeing it spread a little into Europe," said Jonathan Kornafel, Asia director for brokerage Hudson Capital Energy in Singapore.

The Platts survey also showed that analysts projected gasoline inventories to have fallen 2.2 million barrels and distillates to have risen 1.9 million barrels during last week.

The International Energy Agency lowered its forecast on Tuesday for oil product demand from 30 developed countries, located mostly in Europe and North America, to 48.6 million barrels a day, down 1.3 percent from last year.

The Paris-based energy watchdog's report arrived a day after China said its crude imports in July, while historically strong, were down 7 percent from the same month last year.

The IEA cautioned that it is too early to determine whether the recent fall in oil prices is a longer-term trend. It said demand in developing countries could offset declines in developed nations, and that it sees Chinese oil demand continuing to grow at a robust pace.

"The question is where will the number level off at for China in the next few months," Kornafel said. "China is an enormous driver for the price of oil, along with India, Brazil and the Middle East."

In London, Brent crude for September delivery rose 40 cents to $111.55 a barrel.

Oil prices were supported by a weakening dollar. The euro rose Wednesday to $1.4927, while the dollar fell to 108.50 yen.

Nymex crude is down about $34, or 23 percent, from its high of $147.27 on July 11.

"I think a drop of 20 percent is a bit over done," Kornafel said. "We've fallen too far, too fast. I expect the market to sit between 110 and 120 in the short-term."

In other Nymex trading, heating oil futures rose 0.24 cent to $3.0805 a gallon (3.8 liters) while gasoline prices gained 0.93 cent to $2.8525 a gallon. Natural gas futures rose 4.8 cents to $8.378 per 1,000 cubic feet.

Crude oil prices continue to rise 14/08/2008

Oil prices hit record highs in July
Oil prices have continued to climb in early trade in Asia after US government weekly figures on Wednesday showed a drop in oil and petrol inventories.

After adding $3 following the news, US light sweet crude continued to climb on Thursday, adding 86 cents to stand at $116.86 a barrel in Singapore trade.

And London Brent climbed 72 cents to $114.19, extending overnight gains.

Disruptions to exports from the Caspian region following the Georgia-Russia clashes had also underpinned prices.

Opec option

Oil giant BP had closed an oil pipeline and a natural gas pipeline running from its Caspian Sea fields through Georgia but neither have been damaged.

On Thursday morning it said it had restarted pumping through the gas pipeline, known as the South Caucausus gas pipeline.

Another BP pipeline that runs through Georgia, the Baku-Tblisi-Ceyhan oil pipeline, was closed last week after an explosion in Turkey.

Meanwhile Iran's Opec governor Muhammad Ali Khatibi has said this week that the cartel of oil producing nations should trim its oil output if demand falls in industrialised nations.

Despite the recent rises prices remain well off the peak of $147 a barrel hit in July.

"There are not that many factors that can drive prices higher," said Gerard Burg, a commodities analyst at National Australia Bank.

Government data

As the US economy slows, demand for oil has fallen and there are predictions that this trend will continue.

On Wednesday the US Energy Department's (EIA) Energy Information Administration data showed that crude oil imports had been hit by tropical storm Edouard.

Petrol stocks fell 6.4 million barrels to 202.8 million barrels in the week ending August 8 - marking a fall three time greater than expected, the EIA data showed.

But data from the EIA also showed that demand for oil in the first half of 2008 saw its sharpest drop in 26 years, compared to a year before.

Gas prices not likely to go down much more, experts say
100 commentsby Ryan Randazzo - Aug. 14, 2008 12:00 AM
The Arizona Republic
The recent retreat in oil and gasoline prices has given drivers a much-appreciated break, but experts warn that the earlier record levels weren't a freak event.

In fact, the prices soared without any sort of major disruption in supply and even as U.S. demand was declining.

So, enjoy the small drop in pump prices for now. Experts say it even could last months, but don't be surprised if a hurricane, war or other event sends prices back up.
And don't expect them to fall much more, if at all.

The U.S. Department of Energy predicts gas prices to end 2008 at an average of $3.65 a gallon, rising to $3.82 next year.

"While the pressure on prices may continue . . . the fundamental picture has remained intact," Goldman Sachs analysts wrote recently, predicting oil would end the year at $149 a barrel.

Filling a sedan's 16-gallon gas tank in Phoenix today costs about $6.40 less than it did June 20, when prices broke records, according to AAA Arizona.

But even with the drop, that fill-up is $18 more than a year ago, when prices averaged $2.62 a gallon.

That's because oil still is about 60 percent more expensive today than a year ago.

Oil prices closed Wednesday at $116 a barrel. They were up for the day but were down more than $30 from a month earlier, when prices hit a record $147.27 a barrel July 11.


Consumption falling

The U.S. is using about 800,000 fewer barrels of oil a day, or 33.6 million fewer gallons, compared with consumption in 2007, according to the Department of Energy.

It is the largest consumption decline the country has seen in 26 years, according to the department.

"You are seeing demand destruction happen in a big way," said Phil Flynn, an analyst with Alaron Futures and Options in Chicago.

Flynn said that oil could fall to $95 a barrel in the short term but that the recent run-up in prices shows that $200 a barrel wouldn't be impossible amid a major catastrophe.

"This (oil-price decline) is a combination of demand starting to fall off and the value of the dollar getting stronger," he said. "We could have hit $200 with a major disruption."

Randall Werner, owner of Advanced Commodity Trading in Scottsdale, blames major investors for artificially pumping up prices earlier this year by purchasing expensive contracts, speculating that prices would rise.

"It's only good for our country that oil is dropping," Werner said. "It was inevitable it was going to happen. It is very good for everyone, except maybe these big fund managers that got stuck in there while it was dropping."


Global demand growing

One of the latest predictions of $200-a-barrel oil came from London's Chatham House institute, which said such prices are possible by 2013 because of current global demand and the failure of oil producers to invest in new resources.

The report by analyst Paul Stevens says many oil-exporting nations could reduce exports as their own domestic demand increases.

"To avoid a crunch, energy policy needs to reduce the demand growth of liquid fuels, to increase the supply of conventional liquids or to increase the supply of unconventional liquids," Stevens wrote. "Only extreme policy measures could achieve a speedy response - and these are usually politically unpopular."

He said governments will be more likely to act as prices rise.

"This (supply crunch) might do for energy policy what 9/11 did for U.S. military and security policy," he said.

During the next 18 months, growing demand in China, the Middle East, Latin America and India should more than offset the slumping demand in the U.S. and other countries, according to the Department of Energy.

Those statistics fuel predictions for continuing price increases.

"Going forward, people should not assume this is more than a temporary break in prices," said Steve Andrews, co-founder of the Association for the Study of Peak Oil & Gas in Denver.

"They should make buying decisions, the homes they buy, their vehicles. They should make those decisions with an eye toward more expensive petroleum in the future probably because there will be a little less of it."

ASPO-USA encourages "prudent energy management . . . during an era of depleting petroleum resources" and promotes the concept that global oil production is near its peak, after which easy-to-recover, inexpensive oil will be in shorter and shorter supply.

"The ceiling (for oil prices) can be enormously high and hard to predict, while the price floor will slowly and gradually keep moving up each year," Andrews said.

"It's impressive we have cut back driving as much as we have, but it's also probably somewhat painful for people. It means less money spent driving to the local mall or vacation spot."

In the next few months, prices should stay low but only to a point, he said.

"It seems likely that OPEC will cut supply a little when the price approaches $100 or $90 a barrel," he said. "That will tend to push prices back up."

Oil prices shoot higher on Venezuela call for output cut
7 hours ago

LONDON (AFP) Oil prices rose sharply on Tuesday after OPEC member Venezuela, concerned about recent lower prices, said it would ask the cartel to agree to a cut in output when it next meets in September.

New York's main contract, light sweet crude for September delivery, jumped 2.88 dollars to 114.65 dollars a barrel as a result, coming off early lows.

London's Brent North Sea crude for October rallied 2.65 dollars to 114.60 dollars.

"The market is reacting to reports that OPEC may cut production," said Veronica Smart, an analyst at the Energy Information Centre in Britain.

Venezuela will propose production cuts at the next OPEC meeting in September if oil prices continue to fall, Venezuelan Energy and Petroleum Minister Rafael Ramirez had said on Tuesday.

"If there is a trend or dynamic toward lower oil prices, Venezuela will consider the possibility of a cut in production," Ramirez said in an official government release.

"This is the position that we will take at the next OPEC meeting" in Vienna in September, he added.

Oil prices fell close to 110 dollars earlier on Tuesday as Tropical Storm Fay missed energy production facilities in the Gulf of Mexico while weak data on the US economy stoked concerns that demand in the world's biggest market will slow.

Prices have fallen significantly since hitting record highs above 147 dollars last month. Yet on Tuesday, they were still almost 15 percent higher compared to the start of the year when oil broke through 100 dollars for the first time.

A leading British energy consultancy, CGES, had on Monday said that the Organization of Petroleum Exporting Countries (OPEC) might decide to cut output next month should the price of crude fall under 100 dollars.

Oil prices were down on Monday owing to the reduced threat from Tropical Storm Fay to energy installations and on news that the Baku-Tbilisi-Ceyhan pipeline would soon reopen.

Fay on Tuesday hit Florida with severe winds and drenching rains but it did not strengthen into the potentially devastating hurricane residents had been dreading.

The Miami-based National Hurricane Center said Fay, which claimed dozens of lives around the Caribbean over the weekend, should begin to weaken now that it was over land.

Turkey had on Monday said that it expected to reopen the Baku-Tbilisi-Ceyhan oil pipeline in a few days after completing repairs to a fire-damaged link.

Inaugurated in 2006, the 1,774-kilometre (1,109-mile) pipeline carries Azeri oil from the Caspian Sea fields via Georgia to Turkey's Mediterranean port of Ceyhan. It is capable of transporting 1.2 million barrels of crude per day.

20/08/2008

LONDON: Oil prices extended recent gains Wednesday, with New York crude climbing above 115 dollars a barrel, on prospects of a possible cut to OPEC production, traders said.

New York's main contract, light sweet crude for September delivery, climbed 55 cents to 115.08 dollars a barrel.

London's Brent North Sea crude for October delivery advanced 54 cents to 113.79 dollars a barrel in electronic deals.

Crude oil prices had already closed up by more than one dollar on Tuesday after OPEC member Venezuela said it would ask the cartel at its September meeting to cut production if downward price pressure continues.

Despite the latest price gains, world oil prices are down from record highs of above 147 dollars, reached in July, as weak US economic data raise fears for oil demand and dim investor appetite for commodities.

The Organization of Petroleum Exporting Countries (OPEC), which is steered by Saudi Arabia, produces about 40 percent of the world's oil.

The US Department of Energy was to release its latest weekly snapshot of energy stockpiles in the country later Wednesday.

Oil prices, which broke through the 100-dollar level at the start of 2008, remain well above year-ago levels.

Oil prices rise as petrol stocks fallFont Size: Decrease Increase

August 21, 2008

OIL prices rose today after a larger-than-expected decline in US petrol stocks but gains were likely to be limited, analysts said.

New York's main oil futures contract, light sweet crude for October delivery, rose $US1.01 to $US116.57 a barrel.

The September contract expired at the close in New York yesterday at $US114.98 a barrel.

Brent North Sea crude for October delivery was 89 cents higher today at $US115.25.

The increases followed the US Department of Energy's (DoE's) report that crude oil stockpiles in the United States climbed 9.4 million barrels in the week ending August 15. Analysts had forecast a much smaller gain of 800,000 barrels.

The DoE said US gasoline, or petrol, reserves slumped 6.2 million barrels last week, compared with market expectations for a drop of 2.4 million barrels.

"People are looking at the gasoline inventory drawdown,'' said Tetsu Emori, fund manager at Astmax asset management in Tokyo.

Gasoline stocks are closely watched at this time of year when American motorists are on the highways for their summer holidays, typically pushing up demand for gasoline.

But analysts say the overall demand for oil in the US, the world's biggest energy consumer, has fallen heavily and there are fears of slowing demand elsewhere.

World oil prices have tumbled sharply from record highs above $US147 set in July as economic stagnation dents global demand for energy.

Prices broke through the $US100 level at the start of the year and Mr Emori said demand worries could help pull oil back towards a range of $US90 to $US105 by year's end.

"I think the price is going to be heading to the downside for the medium term, to the end of the year,'' he said.

Traders said interest was rising about the Organisation of the Petroleum Exporting Countries' (OPEC) position at its September meeting. OPEC, which is steered by Saudi Arabia, produces about 40 per cent of the world's crude.

A leading British energy consultancy, CGES, said Monday that OPEC might decide to cut output next month should the price of crude fall below $US100.

Oil extends losses after biggest drop since 2004Reuters, Monday August 25 2008 *

By Fayen Wong

PERTH, Aug 25 (Reuters) - Oil deepened losses on Monday, hovering just above $114 a barrel, on diminishing supply concerns as Tropical Storm Fay crossed over land and on easing geopolitical tensions as Russia withdrew the bulk of its troops from Georgia.
But analysts said geopolitical tensions between United States and Russia, the world's second-biggest oil producer, would continue to lend support to prices until Moscow withdraws its troops completely from Georgia.
U.S. light crude for October delivery fell 34 cents to $114.25 a barrel by 2343 GMT. The contract fell $6.59, or 5.4 percent, to settle at $114.59 a barrel on Friday -- the biggest one-day fall in percentage terms since Dec. 27, 2004.
Oil has fallen about 22 percent since its peak of above $147 struck mid-July on concerns high energy costs are taking a toll on global fuel demand.
"The easing of Tropical Storm Fay and the pullout of Russian troops from Georgia has taken some risk premium out of the market," said Toby Hassall, chief analyst at Commodity Warrants Australia in Sydney.
"But there will be some degree of geopolitical tensions as long as Russia still has troops stationed in Georgia."
Russia, which began to pull out the bulk of its forces from Georgia last week, said on Saturday its troops would patrol one of Georgia's main Black Sea ports, defying Western demands for a complete pullback to positions held before fighting broke out over a Georgian rebel region.
The easing of Tropical Storm Fay, which poured rain along the U.S. Gulf Coast on Sunday, also diminished concerns the storm might disrupt oil and natural gas production at the Gulf of Mexico production areas.
Energy companies, including Chevron Corp ExxonMobil Corp, BP Plc, ConocoPhillips and Royal Dutch Shell said they were keeping track of the storm but their operations were not affected.
Analysts said the market would also keep a close watch on the U.S. dollar, after its surge on Friday helped push oil prices lower.
Oil's sharp fall on Friday was also prompted by reports that showed an uptick in OPEC crude oil output and another showing an expected decline in U.S. travel over the Sept. 1 Labor Day holiday weekend as high fuel prices hit consumers.
Industry consultant Petrologistics said on Friday OPEC oil output was expected to rise in August by 450,000 barrels per day, to 32.95 million bpd, a factor that could further beef up inventory levels in consumer nations. The U.S. auto and travel group AAA said Labor Day holiday travel was expected to fall this year by the largest amount in at least eight years as consumers struggle with higher gasoline prices and airfares. (Reporting by Fayen Wong; Editing by Anshuman Daga) BusinessAds by Google

Oil firm above $115 on tropical storm, Russia tension

Tue 26 Aug 2008, 5:33 GMT

(Reuters) - Oil extended gains to stay above $115 a barrel on Tuesday, supported by worries that tropical storm Gustav in the Caribbean would turn into a hurricane and disrupt oil output in the Gulf of Mexico.

Crude for October delivery rose 37 cents to $115.48 a barrel by 0225 GMT, while London Brent crude gained 42 cents to $114.45 a barrel.

Tropical Storm Gustav, the seventh tropical storm formed in the central Caribbean, could strengthen into a hurricane before striking vulnerable Haiti, the U.S. National Hurricane Center said.

It was expected to hit Hispaniola, the island shared by Haiti and the Dominican Republic, on Tuesday. At least one computer forecasting model showed the storm could enter the Gulf.

A drop in the dollar against the yen, pressured by sharp losses in the U.S. equities market, also helped buoy oil prices.

Jonathan Kornafel, Asia director at U.S.-based options trader Hudson Capital Energy, based in Singapore, said concerns about a possible hurricane had "a lot to do" with the gains in the past two days.

Support also came from ongoing tension between the West and Russia over Georgia and expectations that oil exporter group OPEC, which meets on September 9, could trim production should prices fall further.

"I think overall the trend of the market is bearish right now, but the hurricane premium as well as the Russia-NATO premium is what's keeping the market from dropping further," Kornafel said.

Russia's parliament urged the Kremlin on Monday to recognise two rebel regions of Georgia as independent states, raising alarm in the West.

Britain said on Monday it believed it would be wrong for all NATO-Russia contacts to be suspended despite widespread concern in the alliance about Russian military action in Georgia.

OPEC OUTPUT

Iran's oil minister said on Monday he expected OPEC to work on preventing the falling trend in crude prices and also to study oversupply in the market when it meets on September 9 in Vienna.

An OPEC source, however, said, the cartel is likely to keep oil output policy unchanged.

Another key piece of data on Wednesday will be U.S. crude oil inventories, which are likely to have risen 1.4 million barrels last week, a Reuters preliminary poll showed.

In the previous week, crude stocks shot up by 9.4 million barrels as crude imports rose after delivery delays caused by Tropical Storm Edouard.

The poll of eight analysts showed an average forecast for a 400,000-barrel gain in distillates.

Analysts expect U.S. gasoline stocks to show a drop of 2.8 million barrels, a fifth straight weekly decline, as refiners drained storage of summer-grade supply ahead of the Labor Day holiday weekend, which marks the end of the summer driving season.

what do you think the floor for oil will be over the next few months. 90, 100$?

Worth watching bloomberg at 715-730pm as they report from Nymex which can indicate sentiment especially on a Wednesday from inventory reaction.Today they reported that Gustav was a worry as well as US/ Western escalations in tension and said that many traders would not want to be short over this weekend with Gustav potentially turning into a Katrina with associated platform evacuations and damage. On the other hand it may fizzle away to nothing. In brief perhaps not the best time to be short

You may be right.

I've got a feeling that one good hurricaine this year might see $147 a distant memory.

The rise earlier this year seems to have been due to a weak dollar and speculation on a massive scale with a bit of supply/demand thrown in. If there was a nasty hurricane, Ras Tanura and the straits of Hormuz got hit, we'd all become Chis Hoys!