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Hurricane Threatens $25 Billion of Damage as Oil Tops $70
Aug. 31 (Bloomberg) -- Hurricane Katrina's swathe of destruction on the U.S. Gulf Coast threatened to cause $25 billion of damage and drove the price of oil above $70 a barrel.
The storm's death toll may reach into the hundreds as rescue efforts continued and looting broke out in New Orleans, where the National Guard patrolled the streets in a bid to preserve order. Gasoline and diesel tanks ran dry at some terminals in the Midwest, South and Southeast as oil refiners and fuel wholesalers across most of the U.S. started rationing deliveries to filling stations and convenience stores.
The oil market is ``having a panic reaction to the possibility of shortages,'' said Deborah White, an economist at Societe Generale SA in Paris. ``We've never seen a disaster on this order before.''
Crude oil for October delivery today rose as much as 84 cents, or 1.2 percent, to $70.65 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $70.57 at 9:28 a.m. London time. Yesterday, it reached $70.85, the highest since the contract started trading in 1983.
Richard Berner, the chief U.S. economist at Morgan Stanley in New York, said the oil market's surge may constitute a ``supply shock'' that may slow the economy. U.S. growth has exceeded 3 percent for nine consecutive quarters, the longest such streak since the 13 quarters ending in March 1986.
BP Plc, Royal Dutch Shell Plc and other oil companies sent helicopter crews to assess damage to the nation's most important oil and gas producing region. Shell said its Mars platform, which can pump 15 percent of the U.S. Gulf's crude oil, was damaged by Katrina on Aug. 29. Gasoline futures extended yesterday's 20 percent jump as refineries in Louisiana and Mississippi remained without power.
Consumers, Currencies
Gasoline for September delivery surged 41.39 cents, or 20 percent, to $2.4745 a gallon yesterday. The contract, which expires today, reached a record $2.57 in after-hours trading.
Wholesale gasoline prices surged 68 cents, or 28 percent, to $3.1245 a gallon yesterday at Gulf Coast terminals, according to data compiled by Bloomberg. In Chicago, wholesale prices jumped 61 cents to $2.9497 a gallon. Retail prices rose to an average $2.619 a gallon in the U.S. yesterday, the AAA said.
U.S. stocks dropped, led by retailers, as rising fuel costs leave consumers with less to spend. Asian currencies mostly fell on concern a 67 percent gain in crude oil prices in the past year will slow the region's economic growth and make it harder for governments to cut their budget deficits.
``At the end of the day, with oil touching $70 a barrel, that is not good for the consumer,'' said Alan Rifkin, an analyst with Lehman Brothers in New York. ``When we are all paying more at the pump to fill our cars, that's less disposable spending that we all have to spend at retailers.''
Eight refineries in Louisiana and Mississippi closed during the weekend, halting at least 1.79 million barrels a day of capacity. Some may remain closed for weeks as repairs are made and power is restored. Television pictures from the areas affected by Katrina showed flooded oil refinery sites.
Valero Energy Corp. estimated that its refinery in St. Charles, Louisiana, will resume operations in one to two weeks. ConocoPhillips, Chevron Corp., Motiva Enterprises LLC, Murphy Oil Corp., Marathon Oil Corp. and Chalmette Refining also closed plants during the weekend.
Rocky Mountains
``Almost all the refiners are now putting marketers on allocation east of the Rocky Mountains,'' Dan Gilligan, president of the Petroleum Marketers Association of America said. ``Some terminals in Ohio, Tennessee, Arkansas and South Carolina are completely out of product. It's just a very precarious situation we're in.''
An Energy Department report today may show the country's gasoline stockpiles had their ninth straight decline last week, before the storm, falling 0.8 percent to 194.8 million barrels, according to the median forecast from a Bloomberg survey of 14 analysts.
U.S. crude oil inventories probably gained another 1 million barrels last week. Supplies the week before were at 322.93 million barrels, almost 11 percent higher than a year earlier. The U.S. government is considering a request from one refining company for a loan of oil from the nation's 700 million-barrel Strategic Petroleum Reserve, established in the 1970s to prevent shortages in times of crisis.
Katrina has shut 1.4 million barrels of daily crude-oil output, according to the U.S. Minerals Management Service, which manages offshore resources.
At least seven oil drilling rigs were adrift in the Gulf of Mexico yesterday and two companies said they couldn't find their rigs and platforms after Katrina plowed through the area.
Buoys, Platforms
Katrina closed the Louisiana Offshore Oil Port, which usually handles about 1 million barrels of crude oil a day, or 11 percent of U.S. imports. It consists of mooring buoys, platforms and pipelines.
The port will not resume oil shipments until power is restored, scheduling manager Mark Bugg said. Entergy Corp., which provides power for the pipeline system connecting the port to refineries, said it will take weeks to rebuild its electricity network in Louisiana.
Shell, Europe's second-biggest oil company, said its Capline crude oil pipeline connected to Gulf of Mexico offshore production was shut because of power failures after the storm.
Port Fourchon, Louisiana, the base for three-quarters of support services to the Gulf's deepwater oil and gas facilities, is shut because of the storm, said Port Director Ted Falgout.
``We have yet to enter because there are several large vessels on the highway in the port itself,'' Falgout said yesterday. Repairs to platforms and pipelines will be delayed if the storm deposited silt in the port's channel, he said.
The storm also shut 8.8 billion cubic feet of natural-gas output, equivalent to 88 percent of the total amount of gas produced in the Gulf, the Minerals Management Service said yesterday.
Natural gas for October delivery rose 52 cents, or 4.7 percent, to close at $11.659 per million British thermal units in New York, the highest since the contract was introduced in 1990. Futures touched $12.30 in after-hours trading today, a record intraday price.
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. I think it would have peaked out for labor day. How the hurricane effects energy may be known next week. However the Fed is taking some action. This may change the worry sentiment.
Spaf
