Another Fuel Price Article: Oil prices surge as Gulf rigs are evacuated

[Dead Money]

Issue Date: 9/21/2005, Posted On: 9/21/2005

Oil prices surge as Gulf rigs are evacuated

Crude oil prices spiked more than $1 a barrel this morning on concern that Hurricane Rita would damage Texas facilities and disrupt production.

Rita, a Category 4 hurricane with 135 mph winds, is churning across the Gulf and is expected to make landfall later this week in Texas, where a quarter of the domestic fuel is produced. Offshore oil rigs in the Gulf are being evacuated, and companies today are deciding whether to shut down refineries. There are 10 refineries in the Houston area.

“Production has been limping along,” says Jerry Nessenson, president of Valvtect Marine Fuel. “With this second hurricane going into the Gulf of Mexico — that’s going to put another crimp into the supply situation.”

Oil production was crippled last month when Hurricane Katrina pounded Louisiana and Mississippi. Crude prices reached more than $70 a barrel, prompting federal officials to dip into the strategic reserve. Four refineries remain closed and production has not yet returned to pre-storm capacity.

“If there’s further damage from Rita, it’s going to be really tough,” says Nessenson.

Crude prices this morning rose to $67.60 in electronic trading on the New York Mercantile Exchange.

The good news for the volatile fuel market is that the Organization of Petroleum Exporting Countries has offered to make available an extra 2 million barrels of oil a day, and a federal report issued today shows that supplies are not declining as feared.

Gasoline inventories last week rose by 3.4 million barrels and gasoline production rose substantially, averaging 8.8 million barrels per day, the Department of Energy said this morning.

Domestic crude oil inventories inched lower by 0.3 million barrels, while refinery inputs for the week ending Sept. 16 were up 660,000 barrels per day from the previous week, to 15.3 million barrels per day.

Industry leaders were concerned that fuel dock prices — which reached $4 a gallon in some areas — would put a crimp in the boating season. Nessenson says boaters continued to use their vessels, and business at marinas his company supplies was good.

This latest round of tumultuous prices likely will have little effect on boating, since the season is ending throughout much of the nation.

— JoAnn W. Goddard

j.goddard@tradeonlytoday.com

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