Oil was down in early morning trading to $113. However, Hurricane Gustav has since strengthened slightly, increasing the chance of offshore oil and gas supply disruptions, and oil is now back to $116.
“I think overall the trend of the market is bearish right now, but the hurricane premium as well as the Russia-NATO premium is what’s keeping the market from dropping further,” said Jonathan Kornafel, Asia director at U.S.-based options trader Hudson Capital Energy.
The storm, of course, is a temporary concern. Russia is a longer-term risk. The main downward trend, meanwhile, is being driven by a change in the supply/demand balance as the world economy heads toward recession.
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