- The Washington Times - Sunday, September 25, 2005

Only three refineries report damage from Rita


Crude oil and gasoline prices in New York fell after U.S. refineries near Houston escaped a direct hit from Hurricane Rita, easing concerns about a shock to strained fuel supplies.

Saudi Arabia’s oil minister, Ali al-Naimi, yesterday said he was “relieved” after only three U.S. refineries reported damage when Rita came ashore Saturday in Louisiana, near the Texas border. At least two of the eight Houston-area plants that account for 12 percent of U.S. refining capacity might resume production this week.

“It appears the industry escaped the worst-case scenario,” said Kurt Hallead, an analyst at RBC Capital Markets. “There may be some minor damage at a couple of refineries in Port Arthur, Texas. With oil prices coming down, it’s got to make the consumer feel pretty good.”

November crude on the New York Mercantile Exchange (NYMEX) yesterday dropped $1.09, or 1.6 percent, to $63.10. The exchange opened for a special Sunday session because of Rita.

Gasoline for October delivery declined 11.42 cents, or 5.5 percent, to $1.9714 per gallon on the NYMEX.

Crude futures in New York have declined 11 percent since reaching a record $70.85 a barrel Aug. 30, the day after Hurricane Katrina struck Louisiana.

That storm became the most expensive natural disaster in U.S. history, costing insurers as much as $60 billion. Rita might lead to claims of as much as $6 billion, according to Eqecat Inc., a storm modeler.

“The panic is over,” said Rob Laughlin, a senior broker at Man Financial, a unit of the world’s largest hedge-fund company. “The U.S. oil-products market should start balancing out in coming days, allowing crude to easily come down through $60 a barrel.”

U.S. gasoline pump prices have fallen 20 cents in the past two weeks to an average $2.81 a gallon, analyst Trilby Lundberg reported yesterday, citing a survey of about 7,000 filling stations by her Camarillo, Calif., research firm.

“Prices have come down dramatically and soon,” Mrs. Lundberg said, as supplies recovered from Katrina and as surging prices lowered demand.

Katrina struck land before the Labor Day weekend, the end of the peak season for gasoline demand. Refiners are preparing to meet heating-fuel demand in the fourth quarter while replenishing gasoline supplies.

Sheik al-Naimi, in Johannesburg for the World Petroleum Congress, said none of Saudi Arabia’s customers in the Gulf of Mexico was affected by Hurricane Rita. The kingdom is the world’s largest oil exporter.

At least 15 refineries in Texas and Louisiana, accounting for about 24 percent of U.S. capacity, were shut down as Rita approached. Valero Energy Corp. said its Houston and Texas City plants might restore processing within seven days. Exxon Mobil Corp. said yesterday that it is beginning to deliver gasoline from its Baytown refinery.

“The oil market took some relief that Rita didn’t come out to be as bad as expected,” said Anette Einarsen, an oil analyst at Nordea Bank AB in Oslo. “There are still some concerns that with damage in Port Arthur, we might be looking at another 5 percent of U.S. refining capacity being out” for several weeks, in addition to the 5 percent knocked out by Katrina.

Valero suffered “significant” damage to two cooling towers and a flare stack at its Port Arthur, Texas, refinery, a spokeswoman said yesterday. It will take two to four weeks to repair the plant, she said. Motiva Enterprises LLC’s refinery in Port Arthur was also damaged by wind, the company said. Motiva didn’t say when it would resume operations.

Marathon Oil Corp. said its Texas City refinery had “minimal” damage, had electrical power available and was asking the plant’s employees to return to work.

Gasoline futures based on wholesale prices on the NYMEX have fallen 20 percent from an Aug. 31 record reached after Katrina disrupted as much as 10 percent of the U.S. refinery capacity.

“Refinery capacity is extremely tight after the hurricane season,” Eivald Roren, president of the World Petroleum Council, said yesterday in Johannesburg.

Of the London trading session, Mr. Laughlin said: “People may regret having opened this early because there’s been nothing to do.”

He said about 360 people were logged on to the International Petroleum Exchange’s trading system at 9:30 a.m. London time, compared with about 2,000 on a normal trading day.

The entire 1.5 million barrels of oil per day that the U.S. pumps in the Gulf of Mexico was shut down as of yesterday because of Rita, according to the Minerals Management Service. That’s equivalent to about 30 percent of the nation’s total output. For natural gas, 75 percent of the region’s production was halted. The Gulf usually accounts for a quarter of the gas the country extracts.

Natural gas for October delivery on the NYMEX fell 34.9 cents, or 2.8 percent, to $11.975 per million British thermal units.

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