Oil, Gasoline Rise as Hurricane Rita Shuts Gulf of Mexico Rigs
Oil, Gasoline Rise as Hurricane Rita Shuts Gulf of Mexico Rigs
Sept. 21 (Bloomberg) -- Crude oil and gasoline climbed as Hurricane Rita threatened rigs, refineries and platforms in the Gulf of Mexico, less than a month after Hurricane Katrina struck.
Producers including BP Plc and Anadarko Petroleum Corp. evacuated staff and shut off-shore operations in the Gulf. Rita may reach the coast of Texas, the producer of a quarter of the nation's refined fuel, by Friday. The storm is expected to grow as strong as Katrina, which shut down nearly 10 percent of U.S. refining capacity when it hit last month.
``Rita is more an issue for refining than it is for production,'' Adam Sieminski, an oil strategist at Deutsche Bank AG, said in London today. ``There are more refineries in Texas than there are in Louisiana,'' so damage could ``possibly'' be more severe than after Hurricane Katrina.
Crude oil for November delivery rose $1.65, or 2.5 percent, to $67.85 a barrel on the New York Mercantile Exchange at 1:09 p.m. in London. Prices extended gains after Rita was upgraded to a Category 4 storm. Oil is 44 percent higher than a year ago.
Oil reached a record $70.85 a barrel in New York on Aug. 30, a day after Katrina struck the Gulf coast. The futures leapt 7 percent two days ago, the biggest one-day gain since December 2001, when the National Hurricane Center said Rita was likely to strengthen on its way to the coast of Texas.
``It won't be like Katrina, which changed course during the weekend when markets were closed,'' said Christopher Bellew, a broker with Bache Financial Ltd. in London. ``It's even conceivable that it will reach Texas before the weekend,'' when commodities markets are still open.
Texas Refining
Some of the U.S.'s largest refineries are located in the Houston and Port Arthur areas of eastern Texas, including Exxon Mobil Corp.'s 557,000 barrel-a-day Baytown refinery and BP's 460,000 barrel-a-day Texas City, Texas, plant.
Texas' 26 refineries have the capacity to process 4.6 million barrels of crude oil a day, or 26 percent of the U.S. total, according to the Energy Department. Most are located along the arc of the Texas coast for Corpus Christi to Port Arthur.
The damage caused by Katrina to refineries when it came ashore on Aug. 29 caused gasoline prices to soar more than 40 percent to a record $2.92 a gallon during the next two days.
Four refineries in Louisiana and Mississippi remain shut, keeping more than 5 percent of U.S. refining capacity offline and may remain so for several months, the U.S. Energy Department said two days ago.
Katrina Consequences
Gasoline for October delivery today rose as much as 4.7 percent to $2.07 a gallon in electronic trading, after falling 3.2 percent yesterday. It recently traded at $2.07 a gallon, 61 percent higher than a year ago.
Brent crude rose $1.27, or 2 percent, to $65.47 a barrel on London's International Petroleum Exchange.
Yesterday, the New York November contract fell 1.9 percent as the Organization of Petroleum Exporting Countries said it will make additional crude supplies available.
Katrina was a Category 4 storm with 140 mph winds when it hit Louisiana, Mississippi and Alabama three weeks ago, killing more than 950 people.
Katrina shut as much as 95 percent of the oil and 88 percent of gas output from the U.S. Gulf of Mexico as offshore platforms and coastal processing plants were evacuated. As of yesterday, 58 percent of Gulf oil production was idle, about 2 percentage points more than the day before, as oil companies evacuated staff from Gulf facilities in Rita's path, the U.S. Minerals Management Service said.
Expected Landfall
Rita is expected to make landfall in either Texas or Louisiana in three days' time, the National Hurricane Center in Miami said.
Rita's maximum sustained winds accelerated to 135 miles (217 kilometers) an hour as of 8 a.m. Miami time, the center said in its latest online advisory. Rita was upgraded from a Category 3 hurricane on the five-step Saffir-Simpson scale.
U.S. crude inventories last week probably rose as the government released emergency stockpiles and refining facilities damaged by Katrina were repaired, a Bloomberg survey said.
Supplies probably rose 1 million barrels in the week ended Sept. 16 from 308.4 million the previous week, according to the median of forecasts by 13 analysts before an Energy Department report to be released today
Gasoline supplies probably fell by 250,000 barrels from 192 million barrels the previous week, according to the median forecast. Distillates, which include heating oil and diesel, probably dropped by 500,000 barrels, the survey showed.
Pump Prices
The average U.S. pump price for regular-grade gasoline fell to 2.764 a gallon, down 0.9 percent from the previous report, the AAA motorists' group said in a report on its Web site.
BP, Europe's biggest oil company, said it was evacuating all its workers in the eastern and central Gulf of Mexico as Rita approached. Anadarko, a U.S. oil company, said yesterday it plans to close its Marco Polo platform 160 miles south of New Orleans.
Exxon Mobil, Royal Dutch Shell Plc, ConocoPhillips and Marathon Oil Corp. have also evacuated staff and shut platforms in the path of Rita.
Corpus Christi, which is about 125 miles from the border with Mexico, is home to two refineries operated by San Antonio-based Valero Energy Corp. and one each by Citgo Petroleum Corp. and Koch Industries Inc.
The four refineries have a combined processing capacity of about 684,000 barrels a day, or 4 percent of the total U.S. capacity, according to company figures and the U.S. Energy Department.
``People are sort of once-burned, twice-shy by this hurricane season,'' said Jason Schenker, an economist at Wachovia Corp., speaking in Vienna. ``People are likely in this event to risk things to the upside. They don't want to take any chances.''
Cushion Concern
Concern about lost production from the Gulf has been heightened by the lack of a cushion of extra supply from other producers, including OPEC.
The group, which pumps about 40 percent of the world's oil, agreed at its meeting in Vienna yesterday to effectively suspend its quota system for the first time since the 1990 Gulf War.
OPEC estimates its members can pump another 2 million barrels a day. The offer of additional barrels starts Oct. 1 and lasts three months.
Most of OPEC's additional barrels will have to come from Saudi Arabia, because most other members are operating at their limits. Most of the additional oil is heavy, sour crude that many refineries are unable to process.
To contact the reporter on this story: Bill Murray in London at at wmurray1@bloomberg.net
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