LONDON, 22 September 2005 — World oil prices made strong gains yesterday as Hurricane Rita gathered speed and threatened fresh damage to vital US Gulf of Mexico platforms and refineries, analysts said.
New York’s main contract, light sweet crude for delivery in November jumped $1.25 to $67.45 per barrel in early trading. In London, the price of Brent North Sea crude for November delivery gained 95 cents to $65.15 per barrel. “It is way too premature to speculate about how much damage (there) could be but clearly there is potential for new highs,” CALYON analyst Mike Wittner said.
Rita strengthened to a category four hurricane yesterday as it roared toward the Gulf of Mexico oil-producing zone, forcing the United States to brace for its second mega-storm in less than four weeks.
The National Hurricane Center said that Rita could reach top intensity (category five) before it hits land, probably over the weekend in Texas - a major US refining area. “There’s 4.0 million-barrels-per-day of refining capacity on the Texas Gulf Coast,” Wittner added.
“The two big centers are in Houston and Corpus Christi and now the storm is pointing right in between these two cities.”
New York crude hit a record $70.85 per barrel on Aug. 30 in the wake of deadly Hurricane Katrina - which devastated the New Orleans region - before easing as the US and other major economies tapped some of their emergency reserves.
Fimat analyst John Kilduff said: “We hate to be prophets of doom and gloom, but the effects of Katrina are still fresh and a storm of equivalent strength, and possibly stronger, is about to hit the other premier refining, production and distribution centre.” Around one quarter of US oil operations are based in the Gulf Coast.
British energy giant BP said yesterday that it was evacuating staff from its Gulf facilities after a similar move by Royal Dutch Shell. The latest weekly snapshot of US crude inventories data from the Department of Energy (DoE), meanwhile, had a limited effect on the market.
Crude inventories dropped for the week that ended Sept. 16 by 300,000 barrels. Traders had been expecting an increase of about one million barrels as oil production recovered from Katrina. Gasoline supplies rose by 3.4 million barrels, the DoE added. Distillates - used for heating oil and diesel fuel - increased 800,000 barrels.
Societe Generale analyst Deborah White said: “The market sold off a bit when we saw the numbers which are quite bearish. “The numbers are not as central to the market as they would normally be because most of our attention is fixed on Hurricane Rita.”
With Rita approaching, around 56 percent of oil production and 900,000 barrels per day of refinery production was still offline as of Monday, according to Sucden analyst Sam Tilley.