NEW YORK - Oil prices plunged to the lowest level in five months Tuesday, falling to within sight of $100 a barrel on signs that Hurricane Gustav only grazed U.S. energy infrastructure in the Gulf of Mexico.
Light, sweet crude for October delivery fell $5.75 to settle at $109.71 a barrel on the New York Mercantile Exchange, after earlier dropping as low as $105.46. It was the lowest trading level since April 4, just before oil began an unprecedented march above $147 per barrel.
Virtually all oil and natural gas production remained shut down in the Gulf of Mexico as energy companies began assessing damage to offshore platforms, rigs and pipelines, according to the U.S. Minerals Management Service. It was too soon to say when output might resume, though some oil companies were preparing to redeploy evacuated personnel as early as Wednesday.
Without serious damage, oil and natural gas facilities could start up again in a day or two, while coastal refineries could take two to four days to resume production, depending up their size. In 2005, Hurricanes Katrina and Rita knocked out the region's offshore energy infrastructure for several weeks.
"Unlike three years ago, it looks like they're going to get in there fairly quickly and get things ramped up again," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "You don't have these platforms bobbing in the Gulf of Mexico like fishing corks. They're pretty much intact."
The drop in oil prices weighed heavily on commodities across the board.
Natural gas futures fell 68.2 cents, or 8.5 percent, to settle at $7.261 a gallon, their lowest closing price since late December.
On Friday, crude prices settled at $115.46 a barrel as Gustav approached the Gulf Coast region, home to a quarter of US. crude production and 40 percent of refining capacity. But traders grew less jittery when Gustav weakened as it neared the offshore oil rigs and Louisiana refineries.
After the storm was downgraded to a tropical depression early Tuesday, oil market traders quickly turned their attention to slowing global economic growth, speculating that demand for crude will be dampened even in rapidly expanding China and India.
"The magnitude of this pullback suggests the market is fully focused on demand destruction," Ritterbusch said. "The speculators, hedge funds and other investors are getting out of this market on a major scale."
Meanwhile, at the pump, a gallon regular gasoline fell less than half a penny to a new national average of $3.684, according to auto club AAA, the Oil Price Information Service and Wright Express. That's more than 10 percent lower than the all-time record of $4.114 a gallon set July 17.
Also weighing on oil Tuesday was a stronger dollar versus the euro. A rising greenback encourages selling from investors who bought oil as a hedge against inflation.
However, crude prices could recover if the dollar weakens again or if oil-producing countries cut back on output to keep prices high, as some analyst have speculated.
The Organization of the Petroleum Exporting Countries is scheduled to meet Sept. 9 in Vienna and has indicated it may take action to defend the $100 a barrel level.
Ahead of Gustav, about 2.4 million barrels of refining capacity was halted, roughly 15 percent of the U.S. total, according to figures from Platts, the energy information arm of McGraw-Hill Cos.
Royal Dutch Shell PLC, BP PLC and other major oil companies conducted flyovers of platforms and rigs Tuesday, searching for major signs of damage or oil spills. More than 80 percent of energy production platforms and rigs in the Gulf were evacuated before the storm.
"We're optimistic things are in good shape, but we won't know the details until we conduct a full assessment," said BP spokesman Daren Beaudo. "If prudent, we'll start ferrying folks out there on Wednesday."
Traders are also keeping an eye on other storms in the region. Tropical Storm Hanna was predicted to come ashore in Georgia and South Carolina late in the week and could regain hurricane strength later in the day. Tropical Storm Ike formed late Monday in the Atlantic Ocean and may become a hurricane in the next 36 hours as it approaches the Bahamas.
Meanwhile, Tropical Storm Josephine formed Tuesday in the eastern Atlantic.
"The storms are likely to provide some upside risks to the oil futures market," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
In other Nymex trading, heating oil futures fell 11.83 cents to settle at $3.0736 a gallon, while gasoline futures lost 12.05 cents to settle at $2.7337 a gallon.
In London, October Brent crude fell $1.07 to settle at $108.34 a barrel.