Ernesto Obliges, Oil Falls, Wall Street Smiles

Last year oil and gas producing areas in the Gulf of Mexico were damaged by hurricane Katrina. This year, the fears are similar. The likely culprit this year was tropical Storm Ernesto. However, Ernesto has changed direction and veered away from the Gulf, thus bringing down the oil prices by more than $2 a barrel.

Ernesto is expected to hit Florida's southern tip on August 30 and then move along the Atlantic coast, missing fields located in the western and central Gulf. Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts said, ``It doesn't look like Ernesto will have much of an impact on production….The track of Ernesto might be bad for Florida but it's good for the oil industry.''

Big oil companies heaved a sigh of relief as looming Ernesto turned away from the region which is still scarred by last year's storms. Shell Oil Co and Chevron Corp. which had evacuated more than a thousand workers from their deep sea operations were now considering returning the crews soon.

Meanwhile, Wall Street rebounded as energy prices fell. The Standard & Poor’s 500 rose 0.52%, to 1,301.78. Other stock indicators also advanced. The Dow headed north to reach 11,352.01.The NASDAQ composite index, also on a high, picked up 0.95%, to touch 2,160.70.

Buyers moved back into transport stocks, which had fallen for seven straight weeks. Oil companies, which benefit from higher prices if crude supplies are disrupted, dipped. Exxon Mobil Corp., the world's largest oil company, dropped 34 cents to $70.09, while British Petroleum PLC shed 16 cents to $68.16. Royal Dutch Shell fell 5 cents to $73.14.

Prices of oil rose last week on concern that Ernesto would follow the path of Katrina which had lead to shutting down of 95 percent of offshore output, toppled offshore platforms, destroyed undersea pipelines and had flooded coastal refineries last year. With all such fears dispelled, Oil prices dropped nearly 3 percent on Monday.