Hurricane Katrina disrupted Gulf Coast petroleum output and rattled energy markets on Monday, sending oil and natural gas prices soaring and setting the stage for a spike in the retail cost of gasoline.
By the end of the day, more than 700 offshore platforms and rigs had been evacuated, two rigs had drifted away and authorities in Alabama were forced to close a bridge over the Mobile River after it was struck by a runaway platform. Oil futures briefly climbed above $70 a barrel for the first time.
The powerful hurricane roiled the industry at a time when producers worldwide were already struggling to keep up with strong demand, and it threatened to constrain the supply of home heating fuels this winter. The rise in energy prices already has slowed the U.S. economy?s growth rate, though domestic fuel consumption is still rising.
The Bush administration said it would consider lending oil from the nation?s emergency stockpile to refiners that request it ? Citgo Petroleum Corp. asked for 250,000-500,000 barrels to ensure its Lake Charles, La., refinery does not run out ? and the president of OPEC said he will propose a production increase of 500,000 barrels a day at the cartel?s meeting next month. Analysts nervously awaited details on the extent of the damage to the region?s platforms, pipelines, refineries and electric grid.
?We?re losing a lot of crude oil and also a lot of natural gas,? said Lawrence J. Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation. Goldstein estimated total refinery production of gasoline, heating oil, diesel and other fuels could fall by as much as 20 million barrels over the next 60 days.
Royal Dutch Shell PLC said on its Web site two of its drilling rigs equipped with tracking devices had ?drifted off location.? The company said it would send aircraft to check the status of its assets ?as soon as it is safe to do so.?
Also Monday, several refiners said damage at their plants appeared to be minimal and oil prices eased from the day?s high of $70.80 a barrel. But if a bleaker picture emerges in the days ahead ? it may take more time to assess damage, depending on how rough the seas are ? prices could run-up once again, analysts said.
Based on conversations with oil and gas companies operating in the Gulf, Goldstein said it appeared Katrina would not curb output for as long as last year?s Hurricane Ivan, even though the short-term impact was significant.
The federal Minerals Manage-ment Service said Monday 92 percent of the region?s oil output was shut-in, or shut down, with more than 3 million barrels of production lost since Friday. The agency said 83 percent of natural gas output was shut-in, resulting in a loss of 15.5 billion cubic feet of lost production since Friday.
The Gulf of Mexico normally produces 2 million barrels of crude oil a day, or about 35 percent of the United States? domestic output, according to government and industry data. About 10 billion cubic feet a day of natural gas is produced in the region.
Wholesale gasoline prices in the New York and Gulf Coast markets soared by 25-35 cents a gallon on Monday following reports more than 8 percent of U.S. refining capacity had been shut down as a precaution ahead of the storm. One analyst said pump prices nationwide would likely average more than $2.75 a gallon by week?s end ? up from $2.61 a gallon last week, according to Energy Department data released Monday.
?Unfortunately, I don?t think $3 a gallon is a hyperbolic number in some markets anymore,? said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He emphasized the market reaction is a reflection of supply tightness, not shortages.
Despite news reports the retail fuel pump prices would shoot upwards as the result of the storm playing havoc with the many refineries and Gulf Coast drilling operations, it wasn?t immediately apparent Monday.
Chuck Mai of Oklahoma AAA said he looked at gas prices in the Oklahoma City area early Monday afternoon and they were holding steady at the $2.56 average price per gallon listed by the association for states in the Southwest.
Some stations in Enid showed that price while others late Monday started price increases of up to 15 to 20 cents at $2.70 per gallon.
The hurricane certainly is not a welcomed event, but Mai said ?we kind of dodged a bullet? Monday in that Katrina veered to the east at the last moment. That spared more damage in the New Orleans area, OPEC announced it would increase production and though oil futures flirted above the $70 per barrel mark, it finished at $67.21.
Natural gas futures briefly surged more than 20 percent after the temporary closure of a critical distribution hub and on concerns power outages and flooding could prevent processors from running their plants for days, if not weeks. Even before Katrina arrived, the Energy Department had warned consumers who rely on natural gas to heat their homes to expect sharply higher bills this winter.
On Monday, Puget Sound Energy of Bellevue, Wash., filed a request with state regulators to pass through higher natural gas costs to its customers, and analysts said more such requests were likely around the country.
Katrina hit an area crucial to the U.S. energy infrastructure ? offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi.
On Wall Street, companies that ferry workers to and from offshore oil platforms, as well as those that provide other support services to the industry, saw their stock prices rise. Shares of Offshore Logistics Inc. climbed 1.96, or 6 percent, to close at $34.41 on the New York Stock Exchange, where shares of Oceaneering International Inc. rose by $1.80, or 4.3 percent, to $44.
Chevron Corp., Royal Dutch Shell, BP PLC, ExxonMobil Corp. and others began evacuating workers from the region over the weekend. The government said 615 platforms and 96 rigs were evacuated. As a precaution, refineries capable of processing some 1.6 million barrels a day were closed, while others reduced their production levels. Sabine Pipe Line LLC on Sunday shut down the Henry Hub, a natural gas distribution center that connects to interstate pipelines. The hub was reopened by Monday afternoon.
The Louisiana Offshore Oil Port, the largest oil import terminal in the United States, evacuated all workers and stopped unloading ships on Saturday. Any significant damage to the port would have a devastating impact, analysts said.
With top winds of 145 mph, Katrina passed just to the east of New Orleans as it moved inland and later dropped to a 105-mph Category 2 storm, sparing this vulnerable city its full fury.
Light sweet crude for October delivery settled at $67.20 a barrel, an increase of $1.07. Crude futures settled at $67.49 last Thursday, the highest closing price since oil began trading on Nymex in 1983.
News -- Eagle Staff Writer Scott Fitzgerald contributed to this Associated Press Story.
Gasoline futures zoomed 13.37 cents to $2.0606 a gallon on Nymex, but on spot markets in New York and the Gulf Coast, prices were as much as 8 cents to 15 cents higher, according to Kloza. Nymex heating oil futures rose by 7.22 cents to $1.9088 a gallon.
Brent crude was not trading Monday, with London?s International Petroleum Exchange closed for a bank holiday.
Hurricane Ivan damaged seven platforms, 100 underwater pipelines and resulted in the loss of nearly 44 million barrels of oil production between September 2004 and February 2005. Natural gas output declined by 172 billion cubic feet over the same period.
React to this story:
This Week's Circulars
ENID - Funeral service for Joe Stubbs, 92 will be 2:00PM Saturday at Anderson-Burris Funeral Home Chapel. Burial will be in Memorial Park Cemetery. Visitation with the family is Friday 4:30PM-6:30PM at the funeral home. www.andersonburris.com
ENID - Funeral services for Candy Warner will be held 10:00 am, Friday, July 10, 2020, at Ladusau-Evans Chapel, with her brother Gene Long officiating. Services are under the direction of Ladusau-Evans Funeral Home.
- Police seeking Texas homicide fugitive
- Two killed early Thursday in ATV crash near Ringwood
- OSDH: Oklahoma tops 500 new COVID-19 cases for 3rd day in a week
- OSDH: New single-day record increase with 858 news cases, 5 new deaths
- OSDH reports 283 new COVID-19 cases in state, 1 in Garfield County, on Sunday
- Cherokee man hurt in accident
- Assisted-living employees test positive for COVID-19
- Man with Nazi flags charged in Sunday shooting in Hunter
- OSDH: 673 new COVID-19 cases in state, 3 deaths
- Vote set on starting officer salary raises, skate park design