Crude Prices Rise As Markets Assess Rita

666 Oil Platforms Left Unstaffed

Yahoo News

By EDITH BALAZS, Associated Press Writer
1 hour, 26 minutes ago

BUDAPEST, Hungary - Crude oil prices fell Monday as markets sighed in relief that Hurricane Rita narrowly missed crucial U.S. petroleum processing zones in Texas.

But 16 Texas oil refineries remained shut down after the storm, and crews found significant damage to at least one in the Port Arthur area, said Energy Department spokesman Craig Stevens.

Analysts warned these outages could lead to petroleum product shortages — and higher prices — with the Northern Hemisphere winter fast approaching.

"I think the market is taking this too calmly and we could see prices bouncing back any time," said Deborah White, an energy analyst with SG Securities in Paris.

"There is an assessment in the market that we have arrived to a very strong turning point and demand will fall sharply," she added.

Light sweet crude for November delivery fell 77 cents to $63.42 a barrel in electronic trading on the New York Mercantile Exchange. The contract had dropped as low as $62.65 during an unusual electronic trading session Sunday in New York.

Heating oil fell 3 cents to $1.92 a gallon, while gasoline slipped nearly 9 cents to $2.00 a gallon.

On London's International Petroleum Exchange, November Brent crude futures fell 38 cents to $62.06 a barrel.

While preliminary assessments show little damage to most refineries in the U.S. Gulf area, a key economic aide to U.S.

President George W. Bush said hundreds of thousands of jobs were at risk if the storm stunted oil production.

"There is of course the direct impact of the shutting down a part of the economy, the loss of several hundred thousand jobs and reduced energy production in the Gulf," warned Ben Bernanke, chairman of the White House Council of Economic Advisers, in a speech Sunday.

Seven facilities in Port Arthur and Beaumont, Texas, and Lake Charles, Louisiana, were without power from Hurricane Rita, which left the 255,000-barrel-per-day Valero Energy Corp. plant in Port Arthur the most heavily damaged. The facility faces at least two weeks of repairs.

The International Energy Agency, the watchdog for industrialized, oil-importing countries, said it could release state-held stockpiles within the week to cushion any lost output from Rita.

IEA Executive Director Claude Mandil said Monday the agency would decide on whether a further release of state-controlled stockpiles of crude and gasoline is warranted within a week or so based on Rita's impact.

The U.S. Minerals Management Service said Sunday that 666 platforms in the Gulf remained unstaffed, up slightly from Saturday. Oil production in the Gulf of Mexico was totally shut down, and more than 80 percent of natural gas output was off. Since Katrina hit a month ago, more than 33 million barrels of oil and 156 billion cubic feet of natural gas have been lost.

The acting secretary-general of the Organization of Petroleum Exporting Countries warned Saturday that volatility is likely to remain a feature of the oil market unless consuming nations and international oil companies commit sufficient financial resources to refinery construction and development.

"It is clear that the present tightness in the downstream sector, especially the lack of adequate refining capacity, will continue to put pressure on prices," Adnan Shihab-Eldin was quoted as saying by Dow Jones Newswires.

Elsewhere, France's largest oil refinery in Normandy is likely to come to a complete halt Monday as a strike over pay extends into its seventh day, oil company Total SA said.

Total said production will halt at the few units still operating at its 328,000-barrel per day refinery, which accounts for roughly 15 percent of France's refining capacity.