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Crude oil futures scaled back from recent highs on Friday amid signs that Hurricane Rita was losing strength after it was downgraded to a category four storm and may miss the Texas refining hub around Houston, where many refiners have already shut their plants.
However, the hurricane season for the western Atlantic has already caused severe energy supply disruption. Almost 30 per cent of US refinery capacity is shut because of the threat of Rita and from the damage caused by Katrina last month.
The hurricanes have also caused significant levels of oil and gas production in the Gulf of Mexico to go off-line, keeping energy markets nervous.
IPE Brent for November delivery fell $2.16 to $62.44 a barrel in London trading, down more than $6 from its record peak of $68.89 reached in the wake of Katrina. But it was up about $1 on the week.
In New York, November Nymex West Texas Intermediate eased $2.31 to settle at $64.19 a barrel. This was down over $6 from its peak of $70.85 reached late last month. But it too was up slightly over the week.
The temporary closure of such a significant amount of US refining capacity has kept refiner margins at lofty levels of almost $20 for making a barrel of petrol or a barrel of heating oil.
US natural gas futures hit a peak of $13.42 per million British thermal units on Thursday on fears of Rita causing further supply disruptions, but they had fallen by about $1 yesterday.
Nymex and the International Petroleum Exchange took the unprecedented step of announcing that they would open on Sunday so energy traders could react to the hurricane’s landfall. Rita also caused jitters among grain traders as many US wheat export terminals are based in Texas. Wheat futures on the Chicago Board of Trade rose 3 per cent this week to $3.33 a bushel.
Elsewhere, gold reached its highest level in almost 18 years when it touched $475 a troy ounce, with many investors eyeing $500 before the year-end.
Gold investors are betting that higher energy prices will feed through to higher inflation and weaken the dollar further.
The benchmark three-month copper price touched a record high of $3,795.5 a tonne on the London Metal Exchange, a rise of almost $300 on the week.
Traders fear demand may exceed supply for the rest of the year, creating tight market conditions.