SAN FRANCISCO --- Crude futures fell from a high of nearly $110 per barrel Monday, amid a rally in the U.S. stock market and the strengthening of the U.S. dollar. However, energy traders still weighing Hurricane Ike's potential to disrupt oil production in the Gulf of Mexico, MarketWatch reported.
The U.S. stock market and dollar drew strength from the news that the government was taking over mortgage giants Fannie Mae and Freddie Mac.
Hurricane Ike and its projected path into the Gulf of Mexico provided some support for oil, "yet the macro picture with the Fannie and Freddie bailout seems to be trumping the storm as the dollar rallies and money flows to equities," Phil Flynn, a vice president at Alaron Trading, told MarketWatch.
Crude oil for October delivery fell by $1.13 to $105.10 a barrel in electronic trading on Globex. It traded as high as $109.89 earlier, MarketWatch reported. October crude dropped 88 cents to $105.35 on the New York Mercantile Exchange after dropping 8 percent last week.
Traders are watching Ike and it should be an interesting week "as it isn't projected to make landfall until next weekend after strengthening once it gets into the Gulf," Darin Newsom, a senior analyst at DTN, told MarketWatch.
Ike weakened to a Category 2 storm from a Category 4 after making landfall in Cuba. Forecasters predict the hurricane will move into the Gulf of Mexico and hit somewhere between Texas and Alabama by this weekend. Ike may emerge into the southeastern Gulf of Mexico by Tuesday night. Its impact on the Gulf could threaten major U.S. oil and gas production areas.
Nearly 80 percent of the oil production and about 70 percent of natural gas production in the Gulf of Mexico have been shut-in, the U.S. Minerals Management Service said.
"Offshore oil and gas operators in the Gulf of Mexico who are re-boarding platforms and rigs and restoring production following Hurricane Gustav are now starting to take precautions for Hurricane Ike," MMS told MarketWatch.