Oil prices climb above $68 a barrel
Crude oil prices climbed above $68 a barrel Thursday as Hurricane Rita closed in on Texas, raising fears it would hit key production facilities along the Gulf Coast that were largely untouched by Hurricane Katrina's onslaught three weeks ago.
The Category 5 hurricane — the highest category possible — with 175-mph winds was expected to strike Texas, the heart of U.S. oil production, on Saturday. More than 1.3 million people in Texas and Louisiana — including hundreds of oil workers — were ordered to evacuate.
"No question, prices are driven by Hurricane Rita," said Energyintel analyst Sam Dale in Singapore. "The fuse is that it will force refinery closures, and if these facilities close it is going to reduce inventories."
Light sweet crude for November rose $1.25 to $68.05 a barrel in electronic trading on the New York Mercantile Exchange. On London's International Petroleum Exchange, November Brent crude oil futures gained 97 cents to $65.70 a barrel.
Nymex oil prices are around 40 percent higher than a year ago, though still below the intraday record of $70.85 they hit Aug. 30 when Katrina made landfall in Louisiana, damaging and shutting down numerous oil refineries and other facilities.
Now Texas, which produces more than 25 percent of total U.S. crude, is bracing for possibly similar havoc from Rita.
Eighteen of its 26 refineries, with a combined distillation capacity of 4 million barrels daily, are located near the Gulf of Mexico. Nine of those facilities, representing 12 percent of U.S. refinery capacity have shut, Dow Jones Newswires reported.
"Some of those refineries in Texas, they're at sea level. It's a table top, it floods very easily," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.
The U.S. Minerals Management Service said Wednesday that 469 platforms in the Gulf are unstaffed, up sharply from 136 on Tuesday. More than 73 percent of oil production in the region was blocked, up from 58 percent Tuesday.
The International Energy Agency said Thursday it will be able to act quickly to release more oil stocks if Hurricane Rita does major damage to energy facilities in the U.S. Gulf of Mexico.
"If any supply disruption occurs again we can make a speedy decision," IEA Executive Director Claude Mandil said.
Earlier this month the IEA released 2 million barrels a day for 30 days in strategic stocks to help offset supply disruptions caused by Hurricane Katrina.
The head of the U.S. Energy Information Administration, Guy Caruso, criticized OPEC for constraining production to keep prices high — days after the oil cartel pledged to make available an additional 2 million barrels daily to cope with high demand.
"Without question," Caruso said Wednesday when asked during a Senate Commerce Committee hearing whether the Organization of Petroleum Exporting Countries has contributed to soaring oil prices.
"OPEC policy has been to constrain production and collude ... Under the FTC definition of collusion and price-fixing, yes," he said. The EIA is the statistical and analytical wing of the U.S. Department of Energy.
OPEC members, responsible for a third of global output, have said the problem is insufficient refining capacity not the amount of crude available.
The Department of Energy said Wednesday that U.S. gasoline inventories rose 3.4 million barrels to 195.4 million barrels in the week ended Sept. 16. Inventories of distillate fuels, which include heating oil, rose 800,000 barrels to 134.1 million while crude inventories dropped 300,000 barrels to 308.1 million, but are nearly 12 percent above year-ago levels.
Natural gas kept rising, up 82 cents to $13.42 per 1,000 cubic feet — making the key winter heating fuel commodity more than 50 percent higher from the same period in 2004. Gasoline rose more than 10 cents to $2.1600 a gallon (3.8 liters) while heating oil rose nearly 5 cents to $2.0860 a gallon.