NEW YORK, 27 August 2005 — Oil prices retreated from record levels yesterday as the diminishing threat from Hurricane Katrina took pressure off the market, analysts said.
New York’s main contract, light sweet crude for delivery in October, fell $1.36 to close at $66.13 per barrel, after briefly trading as high as $67.95.
Oil hit a record closing price on Thursday of $67.49, and briefly touched a record of $68 late Wednesday - the highest point since it was first traded in 1983.
“Crude oil tumbled in the final minutes of trading as traders are taking an attitude that prices may not see a substantial gain based on supply disruptions from Hurricane Katrina,” said John Person, president of National Futures Advisory Service.
Also, there is speculation “that the government is ready to make a deal to release some supplies from the Strategic Petroleum Reserve,” he said. “That talk circulated as Florida’s gasoline inventories depleted as citizens prepared for the Hurricane.”
In London, October Brent crude oil futures on the International Petroleum Exchange rose 25 cents to $66.52 a barrel.
Meanwhile, oil companies yesterday evacuated some workers from platforms as Hurricane Katrina entered the Gulf of Mexico, with one company shutting a small amount of crude oil and natural gas production, the companies said. Total shut some of its offshore production while at least five others evacuated workers but had not cut production. Katrina strengthened to a Category 2 - winds of at least 96 mph — hurricane yesterday but its projected path lies east of most of the offshore production rigs.
Most companies said that if the storm takes a more westerly tack, more crude and natural gas production may be shut-in. The projected path is west of Thursday’s estimates, but still east of the heart of crude and gas production in the gulf, according to the National Hurricane Center.
Katrina is expected to become a major hurricane on Saturday, a Category 3 on the Saffir-Simpson scale, which means sustained winds of at least 111 mph.
The next landfall is expected Monday in the Florida panhandle. This is east of the major oil refineries on the Gulf Coast.
Some private forecasters said the storm could hit land as far west as eastern Louisiana, which would put the storm over gas and oil platforms and pipelines south of Mississippi and Alabama. The Louisiana Offshore Oil Port was operating normally yesterday, a LOOP spokeswoman said. During some storms, the LOOP stops offloading oil tankers carrying foreign crude.
Apache Corp., Murphy Corp. and Kerr-McGee Corp. yesterday also evacuated some workers but were not cutting production in the eastern gulf. Thursday, BP and Shell Oil also evacuated workers but kept production going. “If the storm takes a more westerly track” Murphy may decide to alter its plans, said company spokeswoman Mindy West.
About 25 percent of domestic US production of natural gas and crude oil comes from offshore operations in the gulf. Offshore production capacity is 1.5 million barrels per day of crude and 10 billion cubic feet per day of natural gas.