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Hurricane katrina shoots oil to over 70b Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=10000103&refer=news_index&sid=aRWjNjC3PedUhttp://www.bloomberg.com/apps/news?pid=10000103&refer=news_index&sid=aRWjNjC3PedU
Oil Soars to Record as Hurricane Katrina Shuts U.S. Production
Aug. 29 (Bloomberg) -- Crude oil soared to a record above $70 a barrel in New York after Hurricane Katrina forced companies including Exxon Mobil Corp. and Chevron Corp. to evacuate rigs in the Gulf of Mexico, where 30 percent of U.S. oil is produced.
Oil had its biggest gain in 29 months as Katrina, the U.S. Gulf coast's worst storm since 1969, disrupted production and headed for refineries that make as much as 15 percent of the nation's fuel. Hurricane Ivan last September cut the region's oil output by as much as a third.
``Damage similar to that caused by Ivan will push oil prices above $75,'' said A.F. Alhajji, an energy economist and associate professor of economics at Ohio Northern University. ``It took more than six months to restore production after Hurricane Ivan. Crude oil prices increased by more than $10 within a month.''
Crude oil for October delivery rose as much as $4.67, or 7.1 percent, to $70.80 a barrel in electronic after-hours trading on the New York Mercantile Exchange. The commodity retreated to $69.32 at 12:57 p.m. in London after the storm's strength was downgraded. Natural gas, heating oil and gasoline climbed to all- time highs today.
Asian and European shares and U.S. stock futures indexes fell on concern rising energy costs will reduce profits and leave consumers with less money to spend. U.S. 10-year treasuries had the biggest gain in over a week.
OPEC
Oil has risen 60 percent this year as the Organization of Petroleum Exporting Countries and other producers failed to increase output enough to meet demand. Consumption in China, conflict in the Middle East and storms in the U.S. Gulf helped boost the price to records.
Hurricane Katrina, with winds of 145 miles (233 kilometers) an hour, lashed the Louisiana coast after more than a million people fled their homes amid fears of flooding.
Katrina, earlier downgraded to a Category 4 from a maximum Category 5 hurricane on the Saffir-Simpson scale, was ``preparing to move onshore near southern Plaquemines Parish, Louisiana,'' the U.S. National Hurricane Center said in an advisory posted on its Web site at 6:00 a.m. local time.
``The chances of another hurricane were pretty strong given what the meteorological service has said about a month ago and I guess the odds were that one of them would hit those production facilities,'' said David Thurtell, a commodity strategist at Commonwealth Bank of Australia. ``It is a bit of a surprise that hurricane Katrina has been so strong. We won't know for some days, may be even a week or so, exactly what the damage has been on production facilities.''
Natural gas for September delivery gained as much as 23 percent to $12.07 per million British thermal units, the biggest one-day rise for 11 months. It was at $11.795 at 12:12 p.m. London time.
The International Petroleum Exchange in London where the Brent futures contract is traded is closed today for a public holiday.
Shell, Exxon
Royal Dutch Shell Plc said it has shut 420,000 barrels of daily oil production in the Gulf because of Katrina, the most powerful hurricane poised to hit the U.S. since 1992. The Louisiana Offshore Oil Port, which handles about 11 percent of U.S. imports, closed Aug. 27 and has since halted all oil movements to shore.
Exxon, the world's largest oil company, evacuated workers and shut about 50,000 barrels of daily oil production and 300 million cubic feet of gas, spokeswoman Susan Reeves said. The company removed 430 employees and contractors from its Gulf facilities last night, she said.
Chevron
Chevron, the second-largest U.S. oil company, didn't have figures immediately about the amount of oil and natural gas that will be shut, spokesman Matt Carmichael said. ``We are still doing the math,'' he said.
Kerr-McGee Corp., a U.S. oil and gas producer, said it evacuated all workers from its production facilities in the Gulf of Mexico because of the Hurricane.
``We have halted all production in the Gulf of Mexico region,'' spokesman John Christiansen said today.
It's too early to assess any damage to assets in the region due to the hurricane, Christiansen said. The situation will be known only after the company sends workers back to their work sites to assess the impact, he said.
``The coastal region from Louisiana to Texas accounts for 50 percent of refinery capacity in the U.S., so If some platforms close down, then 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.
State of Emergency
A state of emergency has been declared in Louisiana and Mississippi. New Orleans, a city of 500,000 within a metropolitan area of 1.3 million, was evacuated of all but essential personnel. Much of the city, 100 miles upriver from the Gulf, lies below sea level.
``It's as bad as it can get,'' said Marshall Steeves, an oil analyst at Refco Inc. ``Hurricane Ivan came through almost a very similar track and did a tremendous amount of damage.''
Oil prices jumped 22 percent in the month after Hurricane Ivan, the third most costly in U.S. records, tore through the Gulf in September, toppling platforms and damaging underwater pipelines.
Lost production in the Gulf because of Ivan peaked Sept. 16. Gas output was reduced by 6.5 billion cubic feet, according to the U.S. Minerals Management Service, which oversees offshore production. Shut production from Katrina could match those numbers, said Paul Sankey, senior oil analyst with Deutsche Bank Securities in New York.
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.
Camille
Camille, a Category 5 hurricane, hit the Mississippi and Louisiana coasts in August 1969. The only other two Category 5 hurricanes to make landfall in the U.S. were Hurricane Andrew, which blew through Florida in August 1992, and the so-called Labor Day hurricane that devastated the Florida Keys in 1935.
U.S. wholesale prices rose in July by the most in nine months on energy costs, reinforcing expectations the Federal Reserve will raise interest rates to fight inflation. In the same month, China's crude oil import bill rose 61 percent to $4.2 billion.
Stocks
European stocks fell, paced by Allianz AG, Volkswagen AG and Ericsson AB, after crude-oil prices surged. The Dow Jones Euro Stoxx 50 Index, a benchmark for the 12 countries using the euro, lost 0.2 percent to 3217.63 as of 11:08 a.m. in London.
The Stoxx 600 fell 0.1 percent, led by insurers as Hurricane Katrina forced companies including Exxon Mobil Corp. to close operations in the Gulf of Mexico. The Stoxx 50 retreated 0.1 percent.
Record energy prices are hurting economies across Asia. Indonesia's rupiah last week slumped 4.1 percent, the most in three years, on concern about the country's ballooning oil import bill. Malaysia's inflation has more than doubled in a year, while Thai consumer confidence fell in July to a three-year low.
China Petroleum & Chemical Corp., Asia's biggest refiner, said today first-half profit rose 17 percent, less than a third of the year-earlier gain, as oil costs cut earnings from making fuels and chemicals.
Gasoline for September delivery rose as much as 23.06 cents, or 12 percent, to $2.1575 a gallon in after-hours electronic trading. It was at $2.1275 at 12:14 p.m. London time.
Heating oil for September delivery rose as much as 17.71 cents, or 9.6 percent, to $2.0137 a gallon in after-hours trading. It was at $1.9770 at 12:07 p.m. London time.
Last Updated: August 29, 2005 08:01 EDT
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