Oil Rallies As Gustav Approaches Gulf

Crude prices touched above $120 on Thursday morning amid concerns Tropical Storm Gustav could cause problems in the Gulf of Mexico's oil region. Light sweet crude for October delivery moved to $119.53, up $1.38 on the session.

Oil hit as high as $120.50 in the early going. Gustav is expected to become a hurricane again later today. Gustav is predicted to reach the Gulf of Mexico over Labor Day weekend, leading to concerns the oil supplies from the region could be disrupted. As a hurricane, Gustav reached landfall in Haiti on Tuesday afternoon, causing killer landslides. Crude oil gained for a third straight session on Wednesday, closing up $1.88 on the session. Traders considered the Department of Energy's mixed bag inventory report. Crude oil inventories decreased by about 170,000 barrels in the week ended Aug. 24. Analysts were expecting to see a build of about 1 million barrels. At 305.8 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Meanwhile, gasoline inventories decreased by 1.2 million barrels last week, and are below the lower boundary of the average range. Market players were expecting a drop of about 2.8 million barrels. Oil prices surged on Tuesday, adding $1.16 for the session. Prices had dropped as low as $112.36 in electronic trading, but later climbed as high as $117.89. Traders also considered a Department of Energy report that revealed lower year-over-year demand for crude oil in the month of June. On the economic front in the U.S., a Department of Commerce report showed that gross domestic product increased at an annual rate of 3.3 percent in the second quarter compared to the advance estimate of 1.9 percent growth. Economists had been expecting GDP growth for the quarter to be revised up to 2.7 percent. Also Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended August 23rd, showing that jobless claims fell to 425,000 from the previous week's revised figure of 435,000. Economists had expected jobless claims to fall to 425,000 from the 432,000 originally reported for the previous week. Copyright(c) 2008 RealTimeTraders.com, Inc. All Rights Reserved