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U.S. crude oil futures tumbled on Tuesday as energy companies assessed damage and geared up to restart energy infrastructure shut ahead of Hurricane Gustav and as a resurgent dollar helped pressure oil.
"The bears have taken control of the crude oil market, having unmasked its weak side, which is demand deterioration, after we weathered Hurricane Gustav," said Phil Flynn, analyst at Alaron Trading in Chicago.
On the New York Mercantile Exchange at 1:19 p.m. EDT (1719 GMT), October crude was down $6.27, or 5.43 percent, at $109.19 per barrel, trading from $105.46 to $118.60.
That intraday low was just above technical support charted at $105. Resistance was slated at $111.60. Both NYMEX and Brent crude fell below the 200-day moving averages around $111.
In London, October Brent was down $1.33, or 1.22 percent, at $108.08 a barrel, trading from $104.14 to $110.45.
NYMEX October RBOB fell 13.15 cents, or 4.61 percent, to $2.7227 per gallon, trading from $2.6082 to $2.96.
Technical support was charted at $2.60.
October heating oil fell 12.73 cents, or 3.99 percent, to $3.0646 a gallon, trading from $2.9560 to $3.2965. Technical support was charted at $2.90.
Energy companies began checking infrastructure for storm damage Tuesday morning. Initial checks revealed only limited damage, though a huge chunk of affected production and refining capacity was expected to remain offline for at least a couple of days.
With Gustav inland and downgraded to a tropical depression on Tuesday, attention turned to Tropical Storm Ike, with Hanna weakened to a tropical storm and not expected to move into the Gulf of Mexico.
The dollar rose to a more than 10-month high against a basket of currencies on Tuesday, boosted by lower oil prices and concerns about the health of major non-U.S. economies.
The euro fell to a seven-month low against the dollar, sliding below $1.45 at one point.
Some oil market sources noted that crude futures also could be pressured by the European Union's rejection of sanctions on Russia over the situation in Georgia.
Russian President Dmitry Medvedev said the rejection of sanctions was positive, but it was disappointing the bloc did not understand the Kremlin's motives in Georgia.
Oil markets await the Sept. 9 meeting of the Organization of Petroleum Exporting Countries, where oil ministers will discuss output and market share policy.
Iran's oil minister said on Tuesday OPEC must discuss oversupply and again indicated the No. 2 OPEC producer wanted the cartel to defend oil from hitting $100 a barrel.
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