Oil prices bounded above $103 a barrel today after falling to another five-month low the previous day, drawing support from Hurricane Ike and OPEC's surprise output cut while wary traders watched the US dollar.
The dollar briefly touched a new one-year high against the euro today but weakened versus the yen, lending a touch of support to a commodities complex that has been battered by the unwinding of the short-dollar/long-commodities trade.
US light crude for October delivery firmed 72 cents to $103.30 a barrel by 6.47am, after rallying more than $1 earlier in the session.
That came after it dropped as low as $101.36 a day earlier after the pressure of a rising dollar and concerns about global demand outweighed earlier bullish news that OPEC had agreed to cut output by about 500,000 bpd.
London Brent crude rose 48 cents to $99.45 a barrel.
"While OPEC has certainly drawn a line in the sand around the $100 level, it remains to be seen if the cartel can actually achieve the cuts outlined in the announcement," said Jonathan Kornafel, Asia director at US-based options trader Hudson Capital Energy.
Oil prices have tumbled 30 per cent since hitting a record high above $147 a barrel three months ago, a descent barely slowed by a pair of hurricanes whipping through the US Gulf, home to a quarter of US oil production.
Oil companies kept shut almost all US offshore production for a second week and began shutting coastal refineries in Texas as Hurricane Ike headed toward the key US energy hub.
Oil output from the region was less than 5 per cent of normal as Ike approached just over a week after Hurricane Gustav spun through the same area. Combined, Gustav and Ike have reduced Gulf production by 14.1 million barrels of oil, 67.9 billion cubic feet of natural gas, cutting into both fuel and crude oil inventories.
US refinery utilisation plunged to 78.3 per cent of total capacity in the week ending September 5th, the lowest level since October 2005 when hurricanes Katrina and Rita ravaged Gulf coast refineries, data showed yesterday.