Futures rise with refinery damage

BLOOMBERG NEWS

Crude oil and gasoline futures rebounded after reports that refineries in Port Arthur and Beaumont, Texas, and Lake Charles, La., may be shut longer than expected after being damaged by Hurricane Rita.

Valero Energy Corp., the nation’s largest refiner, said its Port Arthur refinery has “extensive” electrical damage and might be shut for two to four weeks. Six other refineries close to the Texas-Louisiana border remain closed after losing power and sustaining damage from winds and flooding.

Crude oil for November delivery rose $1.61, or 2.5 percent, to $65.80 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices are 33 percent higher than a year ago.

Gasoline for October delivery rose 3.94 cents, or 1.9 percent, to $2.125 a gallon on the Nymex. Prices reached $2.92 a gallon on Aug. 31, the highest since trading began in 1984. Futures are 58 percent higher than a year ago.

At the pump, the average retail price for a gallon of regular gasoline rose 7 cents over the weekend to $3.04 in the District, according to AAA Mid-Atlantic. District motorists are paying the second-most-expensive price to Hawaii drivers, who pay an average of $3.28.

Maryland motorists pay an average of $2.89 — the seventh-highest cost in the nation. In Virginia, the average price is $2.79, ranking it 21st.

According to the U.S. Energy Information Administration, the national average for a gallon of gas rose 1 penny this week to $2.80.

At least 29 percent of U.S. crude-oil refining capacity was shut because of Hurricanes Rita and Katrina, according to data from the companies and the Energy Department. The refineries, which include six of the 10 largest in the United States, have a combined oil-processing capacity of 4.94 million barrels a day.

Oil production in the Gulf of Mexico, which accounts for 30 percent of U.S. output, was halted because of Rita and Katrina, the U.S. Minerals Management Service said.

Chevron Corp. said its Typhoon platform in the Gulf was “severely” damaged after Rita. The platform, which accounts for 3 percent of the company’s Gulf production, was severed from its mooring and is being secured, the company said.

“The real issue is offshore production,” said David Pursell, a partner at Pickering Energy Partners in Houston. Rita became a Category 5 hurricane on the five-tier Saffir-Simpson scale before coming ashore, with winds of more than 155 mph as it swept over oil and gas production facilities. Damage to oil production platforms such as Chevron’s Typhoon shows how strong the winds and waves from Rita were, Mr. Pursell said.

About 5 percent of U.S. refining capacity remains closed because of Katrina. Four plants are scheduled to resume output in November or December at the earliest. Katrina caused gasoline shortages in parts of the South and Midwest after refineries and pipelines were damaged or left without power, pushing prices at the pump above $3 a gallon.

“These storms showed us we need additional capacity, additional refining capacity for example, to meet the needs of the American people,” President Bush said.

The last refinery built in the United States was a Marathon Oil Corp. plant in Garyville, La., that opened in 1976.

Story Continues →