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Commodities: Tropical Storm Fay pushes oil higher

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Date: Wednesday 20 Aug 2008

LONDON (ShareCast) - Oil prices closed higher Tuesday, snapping its three-day decline, on worries about the impact of Tropical Storm Fay on production in the Gulf of Mexico.

US September crude settled $1.66 higher at $114.53 a barrel in New York after a volatile session and ahead of the expiry of the September contract Wednesday.

A weaker dollar also helped fuel oil demand as the greenback fell against most major currencies. Downbeat US housing data hit dollar sentiment and weighed on Wall Street.

Also there is lingering concern about tensions between Russia and Georgia as Russian troops start to withdraw from the area which is a key oil supply point to the West. Western leaders are hoping that Russia sticks to the peace agreement brokered by French President Nicolas Sarkozy but so far its withdrawal has been slow.

Meanwhile traders are looking ahead to weekly oil supply data by the US Energy Department. Figures are expected to show a 1.1m barrel drop in crude supplies, and a decline in gasoline and distillate supplies.

Precious metals finished higher with gold for December delivery recovering from early weakness to finish $11.10 higher at $816.80 an ounce on the New York Mercantile Exchange. The yellow metal was boosted by a rise in oil prices and the weakening dollar.

Silver ended slightly higher at $13.105 an ounce.

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