Oil prices remain stable in face of Hurricane Gustav

Global - Oil traders breathed a sigh of relief as Gustav dropped to a category 1 hurricane before hitting the Louisiana coast.

Oil and gas production were stopped ahead of Hurricane Gustav, but oil prices remained stable.

World oil prices rose by less than US$1 in Asian trade on Monday, even though Hurricane Gustav forced the shutdown of almost all oil production in the Gulf of Mexico.

Light sweet crude rose 84 cents to US$116.30 a barrel on Friday, continuing its journey back down to the US$100 mark from record highs of approximately US$140 in July.

Oil prices dipped to approximately US$111 on the New York Mercantile Exchange after the hurricane weakened from an initial category 4 estimate to category 1.

According to analysts, if oil facilities manage to survive the hurricane undamaged, oil prices should continue to drop, but damage on the scale of Hurricane Katrina three years ago could generate a price surge to approximately US$120.

Oil prices have remained relatively stable recently, due to underlying concerns of a global economic slowdown and falling demand for oil.

About one-quarter of US oil production comes from the Gulf, but approximately 96% of Gulf oil production and 82% of natural gas production have been shut down on Sunday in the face of the storm, said the federal Minerals Management Service.

Logistics companies have also been preparing for the Hurricane. FedEx for example, has implemented operational contingency plans to "ensure the safety of our employees, team members and contractors and to protect our assets and customers' shipments," the company said in a statement.

Some of its measures include closing its FedEx Express facilities in Harahan, New Orleans, Metairie and Kenner, Los Angeles until the storm has passed. FedEx Ground, Freight and National will also suspend operations on 2 September in the same areas.

FedEx said customers' shipments destined for the named areas will be held outside of the projected path of the storm and will be delivered as soon as it is safe to resume operations.

The company said it has also positioned emergency cells in the Gulf Coast area for the American Red Cross to support in the command centres and shelters.