Oil prices were little changed near $108 today after falling nearly 8 per cent this week as traders shed commodities positions to join a dollar rally and on signs that $100-plus prices were crippling demand.
Concerns about the health of the US economy overshadowed an unexpected drop in weekly US crude oil stocks, with a deeper draw expected this week as the industry registers the effects of Hurricane Gustav, which shut down Gulf refineries and oilfields.
US crude for October delivery rose 1 cent to $107.90 a barrel by earlier. The contract fell yesterday to settle at $107.89 a barrel, its lowest since April 4.
"Continuing worries about the international economic outlook, a firmer US dollar, and, possibly, market speculation that Opec may not move production levels following next week's Opec meeting left oil prices softer," David Moore, commodity strategist from Commonwealth Bank of Australia, said in a note.
Opec meets on September 9th, with some expectations the cartel may opt to cut oil prices to prevent a build-up of surplus stocks that could deepen the slump slump in prices, which have fallen sharply from a July record high of $147.27 a barrel.
Iran has said the producer group may need to cut oil supplies by as much as 1.5 million barrels per day, or nearly 5 per cent, to balance global markets by early next year.
Traders set aside an unexpected fall in US crude oil inventories by 1.9 million barrels last week - against a forecast of a 200,000-barrel increase - to focus on the likely effects of Hurricane Gustav, which will skew next week's data.
The US government inventory data also showed total demand for oil products, such as gasoline and distillates, over the past four weeks, fell 3.5 per cent from a year ago, continuing a trend of weak consumption in the midst of an economic downturn.
Some 25 per cent of US crude oil production remains shut after Gustav tore through the Gulf, and twelve US oil refineries with a total capacity of 2.428 million barrels per day remained shut although four refineries are back to normal.
Production shutdowns in the Gulf of Mexico has already have cut 7.4 million barrels of cumulative output, about a third of daily US oil consumption, according to government data.