Oil prices sank below $100 a barrel yesterday as traders awaited the outcome of the Opec meeting.
ICE October Brent tumbled to $99.04 in intra-day trading before closing at $100.34 a barrel, down $3.10 on the day. Nymex October West Texas Intermediate settled $3.08 lower at $103.26.
The premium for WTI over Brent reflected ongoing concerns about hurricane Ike.
Although weather forecasts indicated that Ike would miss oil production facilities in the Gulf of Mexico, energy companies started to shut production in case the storm changed course. After hurricane, Gustav, almost 80 per cent of oil production in the Gulf remains closed and traders estimate 10m barrels of output has been lost.
Analysts at Barclays Capital said these production losses could have an impact on US gasoline stocks, which were already running 2.9m barrels below their five-year average.
Weekly US inventories data, due out today, were expected to show a fall of 3.8m barrels in crude stocks, a decline of 2.2m barrels for distillate inventories (including heating oil) and a drop of 3.5m barrels for gasoline stocks.
Profit margins for refiners producing gasoline and heating oil started to recover last week.
Mike Wittner, global head of oil research at Société Générale, said a continuation of that improvement was important. "Without healthy product demand and refining margins, refiners will not want to buy crude oil, and that is, in the end, what drives crude prices."
Ahead of yesterday's meeting in Vienna, Opec members remained divided over whether to reduce production, with Iran supporting a cut while Kuwait expressed opposition to any move.
Ali Naimi, Saudi Arabia's oil minister, said the oil market was "fairly well balanced", which some traders interpreted as a signal that a formal production cut was unlikely.
With Opec pumping about 30.4m barrels a day in August, above the 29.7m b/d quota, analysts at PFC Energy said the cartel would trim production from current levels by about 500,000 b/d.
US natural gas prices also fell, with Nymex October Henry Hub down 26.4 cents, or 3.5 per cent, at $7.265 per million British thermal units. Orange juice futures dropped sharply as fears that hurricane Ike could affect growing areas in Florida eased. ICE November orange juice futures fell 7.4 per cent to 91¼ cents a pound, down 16 per cent this week to the lowest level since 2005.
Gold sank to $784.20 a troy ounce in London trading, down 2.2 per cent on the day. Dollar strength ensured continued downward pressure on gold prices, which touched a session low of $777.10, close to the $773.90 trough for this year reached in August.
John Hathaway, of Tocqueville Asset Management, speaking at the Denver Gold Forum, said gold prices could double in the next two years as the US financial crisis deepened.
Platinum prices remained under pressure, down 6.9 per cent to $1,245 a troy ounce, amid ongoing concerns about demand from the automotive sector as vehicle sales have slowed.
Rhodium prices have sunk to $4,700 a tonne after reaching a record $10,500 in June, also because of poor demand from carmakers, which accounted for 80 per cent of global sales last year.
