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Oil prices up as Rita prompts evacuations
Concerns that Hurricane Rita could smash into key oil facilities in Texas lifted crude-oil prices nearly $1 a barrel Wednesday as workers fled oil rigs in the Gulf of Mexico less than a month after Hurricane Katrina tore through the same region.
An offer by the Organization of Petroleum Exporting Countries to make available an extra 2 million barrels of oil a day did not seem to quell the market as the focus remained on the storm. Prices could also rise further Wednesday after the U.S. Department of Energy releases its weekly petroleum inventories snapshot, which could show declining crude and heating oil stocks because of Hurricane Katrina. Light, sweet crude for November delivery rose 95 cents to $67.15 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe on its first trading day as the front-month contract. October futures fell $1.16 to close at $66.23 a barrel in New York on Tuesday. On London's International Petroleum Exchange, November Brent crude oil futures gained 98 cents to $65.18 a barrel. Prices are nearly 45 percent higher than a year ago. They reached an intraday record of $70.85 on Aug. 30 when Katrina made landfall, wreaking destruction on oil refineries and other facilities in Louisiana and surrounding areas. Forecasters said Wednesday that Rita could intensify in the Gulf of Mexico into a Category 4 storm with winds of at least 131 mph. The most likely destination by week's end was Texas, although Louisiana and northern Mexico were possibilities, according to the U.S. National Hurricane Center. Texas, the heart of U.S. crude production, accounts for 25 percent of the nation's total oil output. Rita is also thwarting recovery efforts as refineries gear up for the Northern Hemisphere winter, the peak season for production of distillate, fuels that include heating oil, jet fuel, kerosene and diesel. Analysts said OPEC's move was not likely to have any impact on lowering prices in a time of high demand and tight supply. "The crude oil that is going to be supplied is the heavy, sour kind, and there is not much refining capacity for that," said Victor Shum, oil analyst at energy consultants Purvin & Gertz in Singapore. "Louisiana refineries can process that, but they are shut down." Light, sweet crude is easier to refine into products, analysts say. With winter approaching, there is an urgency to process distillates such as heating oil, diesel, jet fuel and kerosene. Heating oil jumped 3 cents to $2.0410 a gallon on the Nymex, while gasoline surged more than 6 cents to $2.0400 a gallon. Natural gas again reached a new peak of $12.880 per 1,000 cubic feet, a rise of 38 cents, before easing to $12.790. "Natural gas is shooting off the charts," said Shum. "We are entering into winter and refineries need to build up heating oil inventories but its a problem when storms keep key facilities shut." The U.S. Minerals Management Service said Tuesday that 136 platforms — mostly in the New Orleans area — remain unstaffed from both Katrina and Rita. That is 53 more than Monday. The industry has lost production of more than 26 million barrels of oil since Aug. 26, when companies first evacuated for Katrina — about 4.7 percent of the Gulf's yearly oil output, the agency said. Numerous companies — BP PLC, Shell Oil, Apache Corp., Exxon Mobil Corp., ConocoPhilips Co., Chevron Corp., Anadarko Petroleum Corp. and Marathon Oil Corp. — have all abandoned facilities in the Gulf of Mexico ahead of Rita. Markets were also watching developments in Nigeria, where a militia threatened to blow up oil installations if the government did not release its leader after he was reportedly arrested. Nigeria is the world's eighth-largest oil exporter and the fifth main supplier to the United States.
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