NYMEX Oil Complex to Open Lower as Dean is Expected to Miss U.S Gulf

NYMEX Oil Complex to Open Lower as Dean is Expected to Miss U.S Gulf
August 20, 2007 8:43:AM ET
By John Troland
Houston, TX - The September NYMEX crude, RBOB gasoline and heating oil contracts are called to open well below Friday's close which had rallied on speculation that Hurricane Dean would enter the Gulf of Mexico and threaten the oil production and refining areas of Texas and Louisiana. Dean, currently a strong category 4 hurricane is now projected to cross the Yucatan Peninsula, enter the Bay of Campeche before making landfall somewhere in Mexico. While there is always a chance the storm could change course and threaten the U.S. Gulf Coast, traders that had either covered short positions on Friday or added length are now liquidating those positions.
At the moment the only bullish factor for oil is the fact that if and when Hurricane Dean enters the Bay of Campeche, a major oil producing area for Mexico, about 400,000 bpd of production from the area will be halted for safety reasons. The loss of output is somewhat significant although U.S. stockpiles of crude is still around 335 million barrels and with another 690 million barrels stored in salt domes along the Gulf Coast by the U.S. government. Regardless of what Dean does, crude supplies will be more than adequate to get though the loss of some Mexican supplies.
Since nearly all weather computer models now place Hurricane Dean making landfall in Mexico we see a very strong potential for prices, especially gasoline, to head lower in the next day or so although any change in the projected path of Dean will be watched closely.
Currently September crude is expected to open $0.40 to $0.70 below Friday's settlement of $71.98. September RBOB gasoline is seen opening 5.00 to 7.25 cents per gallon down from Friday's settlement of $2.0388. September heating oil is expected to open 1.75 to 3.25 cents lower than Friday's settlement of $2.0173.
Technically, September crude has first resistance at $71.75 per barrel and then $72.20, while initial support for today is at $70.80 and then $70.10 per barrel. September RBOB gasoline's resistance is pegged at $2.0050 and then $2.0225 per gallon while support is pegged at $1.9550 per gallon and then $1.9310. September NYMEX heating oil has resistance at $2.0110 and then at $2.0250 while support is at $1.9710 and then $1.9550 per gallon.
In London, October Brent is currently at $70.25 per barrel, down $0.19 from Friday.