The price of crude dropped to as low as $105.46 a barrel in US trade due to the weakening Hurricane Gustav. Washington's decision to release oil from its strategic reserves put further downward pressure on prices as Asian markets opened.
Oil prices fell in Asian trade Wednesday as the US government announced the release of oil from its strategic reserve to help with recovery efforts after Hurricane Gustav.
In afternoon trade New York's main contract, light sweet crude for October delivery, dropped 71 cents to 109.00 dollars a barrel, while Brent North Sea crude for October delivery eased 74 cents to 107.60.
The United States announced Tuesday it was releasing 250,000 barrels from its emergency supplies, known as the strategic reserve.
"The release of the oil will prevent any shortage and that will, of course, help calm the market," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.
The US Strategic Petroleum Reserve is a complex of underground storage caverns that hold emergency supplies of crude oil. According to the US Department of Energy, the inventory exceeded 700 million barrels on April 2.
There was no oil production Tuesday in the hurricane-affected region, where a quarter of US oil is normally produced, the US Department of the Interior said. Ninety-five percent of natural gas production was offline.
The threat from Gustav raised grim memories of the 2005 hurricanes Katrina and Rita that damaged or destroyed about 165 of around 4,000 oil platforms in the Gulf.
But damage this time appeared to be less severe.
Crude prices have eased about 25 percent since reaching record levels above 147 dollars in July, pulled down by worries about slowing global growth affecting energy demand.
"As the reality of this storm is now becoming clear, energy bulls are on the run and the market is finally facing up to the realities surrounding it," said Phil Flynn, an analyst at Alaron Trading.
As oil prices fell, Iran called for the Organisation of the Petroleum Exporting Countries (OPEC), which produces 40 percent of world output, to discuss excess supply at its meeting in Vienna on September 9.
"Some OPEC members are providing the market with excess supply and producing more than their OPEC quota. Therefore, at the next meeting the members will request a stop to the excess supply," Oil Minister Gholam Hossein Nozari said.
He said 100 dollars a barrel was a minimum for oil prices. Iran is the world's fourth-largest crude producer.
Date created : 2008-09-03