oil drops $4 on financial turmoil and Ike
15 September 2008
 
Oil plunged more than $4 on Monday as investors fled to safer havens due to turmoil in the U.S. financial system and on early signs Hurricane Ike had spared key U.S. energy infrastructure.
Lehman Brothers' (LEH.N: Quote, Profile, Research) filing for bankruptcy protection and Bank of America's (BAC.N: Quote, Profile, Research) agreement to buy Merrill Lynch (MER.N: Quote, Profile, Research) stirred concerns that mounting global economic problems would slow energy demand further, sending investors out of oil.

U.S. crude dropped $4.78 to $96.40 a barrel at 7 p.m. British time, after hitting a seven-month low of $94.13 and extending a 34 percent slide from peaks in mid-July amid mounting evidence of slowing fuel demand. London Brent crude fell $5.33 to $92.25 a barrel.

"Oil sold off in the aftermath of the collapse of Lehman Brothers and the buyout of Merrill Lynch," said Phil Flynn, an analyst at Alaron Trading in Chicago. He said news that damage from Hurricane Ike was not as bad as feared also pressured prices.  Oil companies rushed to check damage to their facilities after Hurricane Ike struck the heart of the U.S. energy industry near Houston on Saturday, leaving a quarter of the nation's oil and refined fuel production idled.

Early indications showed no major damage to energy infrastructure, though several Texas refineries remained without power. The U.S. Department of Energy said plants suffered minimal damage and were preparing to restart.   U.S. stock markets fell after news of the Lehman bankruptcy and as investors waited for insurer American International Group (AIG.N: Quote, Profile, Research) to announce a survival plan as it tries not to become the next casualty of the credit crunch.

http://uk.reuters.com