Crude Oil Soars, Topping $70, as Katrina Intensifies
Crude oil soared above $70 a barrel in after-hours trading Sunday, setting a record, after Hurricane Katrina forced oil companies to halt operations in the Gulf of Mexico.
Oil had its biggest gain in 29 months while gasoline and heating oil also reached records as Katrina, expected to be one of the most powerful storms to hit the U.S., crossed the Gulf, source of 30% of the country’s oil production and 24% of its natural gas.
“Forecasters are saying Katrina could do more energy damage than any storm in recent years,” said Jason Schenker, an economist with Wachovia Corp. in Charlotte, N.C. “It’s not just that there’s going to be outages for the next couple of days. With shutdowns and damage at platforms and refineries, the bullish impact could be felt for the rest of the year.”
Crude oil for October delivery rose as much as $4.67, or 7.1%, to $70.80 a barrel in electronic after-hours trading on the New York Mercantile Exchange.
Natural gas for September delivery gained as much as 23% to $12.07 per million British thermal units, its biggest one-day rise in 11 months.
Royal Dutch Shell said it had shut down 420,000 barrels of daily oil production in the Gulf because of Katrina.
Exxon Mobil Corp., the world’s largest oil company, evacuated workers and stopped 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 Saturday night, she said.
Chevron, the second-largest U.S. oil company, could not supply figures Sunday on shutdowns, spokesman Matt Carmichael said. “We are still doing the math,” he said.
With sustained winds of at least 165 mph, Katrina became a Category 5 storm Sunday, the most severe class of hurricane. It would be only the third storm of that magnitude to hit the U.S. since the government began keeping storm records.
“The storm is more severe than we’ve thought; it’s turned into a monster,” said Paul Sankey, senior oil analyst with Deutsche Bank Securities.
Oil prices jumped 22% in the month after Hurricane Ivan, the third-most-costly hurricane in U.S. records, tore through the Gulf last September, toppling platforms and damaging underwater pipelines.
Lost production in the Gulf because of Ivan peaked Sept. 16 at 1.4 million barrels of oil daily and 6.5 billion cubic feet of natural gas, according to the U.S. Minerals Management Service, which oversees offshore production. Lost production because of Katrina could match those numbers, Sankey said.
U.S. supplies of refined products, including gasoline, jet fuel and diesel, may also fall as refineries near the path of the storm shut down. ConocoPhillips, the biggest U.S. refining company, closed its Alliance refinery south of New Orleans. Chevron and Valero Energy Corp. also shut refineries and evacuated staff.
Gasoline for September delivery rose as much as 20.31 cents, or 10.5%, to $2.13 a gallon in after-hours electronic trading.