Energy prices jump even as Gulf storm weakens

Oil prices shot above $80 a barrel Monday as a weakened U.S. dollar created more turbulence in energy markets than a tropical storm heading into the Gulf of Mexico.

Ida had helped push crude prices higher all morning, but just as the then-hurricane was demoted to a tropical storm, the euro pushed passed the $1.50 level for the first time this month and sent oil even higher.

Investors holding euros or other strong currencies can buy more dollar-based crude when the U.S. currency falls, and that has sent prices higher throughout the year.

Demand for crude is still weak, but investment in crude futures has still paid off this year. A barrel of oil cost $32 in December.

Benchmark crude for December delivery on Monday rose $2 to settle at $79.43 a barrel on the New York Mercantile Exchange. A barrel passed $80 by early afternoon before easing back.

Uncertainty about the Ida's path and its punch supported prices, at least until midmorning when wind speeds had dropped by 20 mph. Forecasters said the storm would continue to weaken and that it would likely head east of most drilling platforms and refineries.

Weather Insight LP is expecting 700,000 barrels per day of crude oil production to be shut in, and 3 billion cubic feet per day of natural gas production to be taken off line until about Wednesday.

Given the huge surplus in oil, natural gas and gasoline in storage, the reaction to Ida on the New York Mercantile Exchange where energy futures are traded appeared to be muted.

Since hurricanes Gustav and Ike raked the gulf last year, there have been no major threats to the energy complex and demand for crude has left the country well supplied.

Crude supplies are 7.62 percent higher than a year ago and gasoline in storage is up 7 percent, according to energy consultancy Cameron Hanover.

The average price for a gallon of regular gasoline fell a half penny overnight to $2.664, according to auto club AAA, Wright Express and Oil Price Information Service. That's 18.8 cents more than a month ago, and 40.5 cents more than gas cost at this time last year.

The Energy Information Administration in its weekly update released Monday afternoon put the national average for unleaded regular at $2.666 per gallon, a 2.8-cent drop from the previous week after five straight weeks of increases.

In other Nymex trading, heating oil rose 5.9 cents to settle at $2.0627 a gallon. Gasoline for December delivery gained 5.75 cents to settle at $1.9818 a gallon. Natural gas for December delivery rose 7.5 cents to $4.67 per 1,000 cubic feet.

In London, Brent crude for December delivery rose $1.90 to settle at $77.77 on the ICE Futures exchange.

Associated Press Writers Alex Kennedy in Singapore, Pablo Gorondi in Budapest, Hungary, and Becky Bohrer in New Orleans contributed to this report.