Oil bounces $1 higher

While wary traders watched the US dollar, the oil prices bounced to a dollar higher on Thursday after a five month low the other day. This drew support from Hurricane Ike and OPEC’s surprise output cut.

Dollar touched a one-year high against the euro but weakened against the yen, giving support to a commodities complex that has been battered by the unwinding of the short-dollar.

U.S. light crude for October delivery stayed $1.03 to $103.61 a barrel by 10:05 p.m., having 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 raised $1.23 to $100.02 a barrel at 9:42 p.m. EDT.

Oil companies shut down

"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 U.S.-based options trader Hudson Capital Energy.

For the second week, oil companies shut almost all US offshore production and also began closing coastal refineries in Texas as Hurricane Ike went toward the key US energy area.

As Ike approached a week after Hurricane Gustav, oil output from the area was less than 5 percent the normal.

Both Gustav and Ike have decreased Gulf production by 14.1 million barrels of oil, 67.9 billion cubic feet of natural gas.

Data showed the US refinery utilization plunged to 78.3 percent of total capacity, the lowest since hurricane Katrina and Rita ravaged the Gulf coast refineries.

Prices also fell on Wednesday after the International Energy Agency cut its world oil demand forecasts for this year and the next as high prices and mounting economic troubles drive consumers and businesses to conserve.

U.S. oil demand is already running about 3.8 percent below last year, according to government data.