Oil Breaches $70 as Hurricane Shuts Gulf of Mexico Production
bloomberg.com
Aug. 29 (Bloomberg) -- Crude oil surged to a record above $70 a barrel in New York after Hurricane Katrina forced companies to evacuate platforms in the Gulf of Mexico, where 30 percent of U.S. oil is produced.
Oil jumped as much as $4.67, or 7.1 percent, to $70.80 a barrel, the biggest increase in 29 months. Natural gas, heating oil and gasoline climbed to all-time highs as well.
Investors are concerned Katrina, the fiercest storm to strike the U.S. Gulf coast since 1969, will rupture pipelines, rip rigs from their moorings and disrupt production for weeks. Hurricane Ivan last September cut the region's oil output by as much as 1.4 million barrels a day. The U.S. produces 5.3 million barrels of crude oil a day.
``There is a long list of production and refineries out because of the hurricane,'' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. ``The course is similar to what we saw with Ivan last year, which hit production for a long time.''
Crude oil for October delivery surged $2.67, or 4 percent, to $68.80 a barrel at 10:09 a.m. on the New York Mercantile Exchange. Prices are 59 percent higher than a year ago.
The International Petroleum Exchange in London, where the Brent futures contract is traded, is closed today for a public holiday.
Hurricane Strength
Katrina had sustained winds near 135 miles per hour (217 kph), the National Hurricane Center said at 8 a.m. local time. The hurricane's center was about 40 miles (64 kilometers) south of New Orleans. Katrina was moving north at about 15 mph, the Miami-based center said.
``Crude oil is the least of our worries,'' said Bill O'Grady, assistant director of market analysis at A.G. Edwards & Sons in St. Louis. ``There is ample supply in storage and the government will tap the SPR, because this is what it is there for. They released supply last year when Hurricane Ivan struck the region.''
The U.S. filled its Strategic Petroleum Reserve, the nation's emergency stockpile of crude oil, to the 700 million- barrel level ordered by President George W. Bush after the Sept. 11 terrorist attacks. The U.S. Energy Department loaned some oil to refiners whose supply was disrupted by Ivan.
U.S. crude-oil supplies jumped 1.9 million barrels in the week ended Aug. 19, the fourth-straight increase, to 322.9 million, according to an Energy Department report on Aug. 24. Stockpiles are more than 10 percent higher than a year ago.
Refined Products
U.S. supplies of refined products, including gasoline, jet fuel and diesel, may also decline as refineries near the path of the storm also shut down. ConocoPhillips, the biggest U.S. refining company, shut its Alliance refinery south of New Orleans. Chevron Corp. and Valero Energy Corp. also closed refineries and evacuated staff.
``The coastal region from Louisiana to Texas accounts for 50 percent of refinery capacity in the U.S., so if some platforms close down, oil could rise five or ten dollars more,'' said Jean-Charles Lacoste, an analyst with Calyon, the securities arm of Credit Agricole SA, France's biggest bank.
Record Gasoline Prices
Gasoline for September delivery surged 22.31 cents, or 12 percent, to $2.15 a gallon in New York. Futures touched $2.1606, the highest since trading began in 1984. Prices are 83 percent higher than a year ago.
Heating oil for September delivery jumped 13.34 cents, or 7.3 percent, to $1.97 a gallon. Futures surged to $2.0137, the highest in 27 years of trading on the exchange. Heating oil is 72 percent higher than a year ago.
The profit margin for turning a barrel of crude oil into heating oil and gasoline is $15.57, based on futures prices in New York. That is up 30 percent from Aug. 26 and more than double a year ago.
``Natural gas is the real worry,'' O'Grady said. ``Unfortunately we can't import the missing production. This is largely a domestic market.''
Natural gas for September delivery jumped $1.755, or 18 percent, to $11.547 per million British thermal units in New York. Futures touched $12.07, the highest since trading began in 1990. Prices have more than doubled in the past year.
To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net.
Last Updated: August 29, 2005 10:22 EDT |
