NEW YORK (AP) — The price of oil fell Monday as the threat to production from Tropical Storm Isaac appeared to lessen and traders speculated about a release of oil from U.S. reserves.
Forecasts for Isaac have moderated, easing concerns that the storm could damage key oil and gas operations in the Gulf of Mexico. The National Hurricane Center now predicts it will grow to a Category 1 hurricane instead of a Category 2. A Category 1 hurricane has winds ranging from 74 mph to 95 mph.
"The production centers in the Gulf can withstand those low-level hurricanes," said Gene McGillian, oil analyst for Tradition Energy.
About one-quarter of the nation's oil is produced in the Gulf of Mexico. As of Sunday afternoon, about 24 percent of Gulf oil production was suspended, according to the Bureau of Safety and Environmental Enforcement.
Benchmark oil fell $1.11 to $95.04 in midday trading on the New York Mercantile Exchange. In London, Brent crude dropped $1.20 to $112.39 on the ICE Futures exchange.
The potential for a release of oil by the Obama administration from the Strategic Petroleum Reserve also depressed the price of oil. The White House has said a release is one option to combatting higher oil prices. Benchmark U.S. oil has risen 22 percent since late June. Brent crude, which is used to price international blends that many U.S. refineries turn into gasoline, is up 23 percent in the same period.
The average price for a gallon of regular gas in the U.S. rose to $3.75 on Monday, the highest since May 9 and up about 42 cents from the low reached on July 2. Analyst and oil trader Stephen Schork said in a daily newsletter that gasoline could rise as high as $3.90 by early October, increasing the odds that the administration will tap the SPR in an effort to bring down oil and gas prices.
Oil was previously released from the SPR to offset price spikes due to the loss of oil production in Libya last year and after Hurricane Katrina battered the Gulf Coast in 2005.
In other energy trading:
--Heating oil rose 1 cent to $3.12 a gallon.
--Wholesale gasoline rose 5 cents to $2.96 a gallon.
--Natural gas fell 4 cents to $2.66 per 1,000 cubic feet.
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