Oil price falls on inventory report

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Thursday, September 8, 2005

A previous storm, Hurricane Dennis, damaged this oil platform owned by BP (July 12, 2005).

Crude oil prices fell by $0.32, to $63.95 a barrel, after a report showed lower than expected losses in oil supplies due to Hurricane Katrina.

According to a report published by the U.S. Department of Energy (DOE), crude oil stocks declined by 6.5 million, to 315 million barrels. The department also announced that 57% of the production capacity in the Gulf of Mexico is still down, versus 97% the day after the storm.

The DOE said it expected that production would not return to normal until December.

Yesterday, economists warned that one of the impacts of Katrina on the US economy would be a reduction in the number of jobs by up to 400,000. They also said the country's GDP, in the second half of 2005, could be 1% less than expected, due to the surge in oil prices.

The Executive Director of the International Energy Agency (IEA), Claude Mandil, announced a collective action by members of the 26 nation agency. An agreement was reached to supply an additional 60 million barrels to the market over the next 30 days. The biggest contribution of total response comes from North America (52%), then by Europe (30%), and finally the Pacific region (18%). The share of these increases is based upon of the consumption from each of the IEA member areas.

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