Recovery eases oil markets

NEW YORK - The gradual recovery of some Gulf Coast petroleum operations hobbled by Hurricane Katrina helped send oil futures sharply lower Tuesday, and analysts predicted that pump prices, now averaging more than $3 a gallon, would decline slightly.

Another financial pinch shaping up for U.S. consumers and businesses in the months ahead is the high price of natural gas, analysts and industry officials said.

With oil prices still trading at close to $66 a barrel, European and Asian economic leaders warned Tuesday that their own growth is likely to slow.

In New York, light sweet crude for October delivery fell $1.61 to settle at $65.96 a barrel on the New York Mercantile Exchange, which was closed Monday for Labor Day.

Crude futures, which briefly topped $70 a barrel last week, fell $1.90 on Friday when industrialized nations announced plans to supply the United States with 2 million barrels per day of crude oil, gasoline and diesel - an amount roughly equivalent to 10 percent of its daily demand.

Gasoline futures plunged by 12.87 cents to settle at $2.055 a gallon on Nymex on Tuesday, but that still leaves them up about 7 percent since Aug. 26, before Katrina struck.

The Energy Department said late Tuesday that the retail price of unleaded gasoline skyrocketed by 45.9 cents last week to average $3.069 nationwide, a new record. That puts pump prices $1.219 a gallon above last year.

At the retail level, "we'll go below $3 a gallon, but not by much," said oil analyst John Kilduff at Fimat USA in New York.

Refco Group Inc. oil analyst Marshall Steeves said the drop in wholesale gasoline prices "will take time to filter down."

Though oil pipelines, import terminals and some refineries shut down by Katrina have restarted operations, four damaged Gulf Coast refineries look likely to remain shut for weeks and possibly months, analysts said.

The emergency supply of refined products coming from Europe will help, analysts said, but it will be more than a week before shipments begin arriving and inventories of gasoline and heating oil will remain tight.

Another knotty problem, analysts said, is the potentially long-term loss of natural gas production in the Gulf of Mexico. Katrina caused significant damage to Royal Dutch Shell PLC's Mars platform, which produces around 250,000 barrels a day of crude oil and 365 million cubic feet of gas a day; about 40 other platforms were lost, though they were smaller facilities.

"We continue to caution that much remains unknown," said Mark Stultz, a spokesman for the Natural Gas Supply Association.

By Tuesday, more than 4 billion cubic feet a day, or 42 percent, of the region's natural gas production remained shut down and 67.6 billion cubic feet of output has been lost since Aug. 26, according to the federal Minerals Management Service.

This is the time of year when utilities typically increase their underground storage of natural gas in order to prepare for winter demand.

The United States does not have an emergency stockpile of natural gas, as it does for crude oil, and the country's capacity for importing liquefied natural gas is limited.

"Natural gas is the one commodity here that I have very little to say about in the way of good news," Mr. Kilduff said.

On Tuesday, natural gas futures slipped 3.4 cents to settle at $11.657 per 1,000 cubic feet. A year ago natural gas futures traded below $5.