Originally created 09/22/05

Oil prices jump as Hurricane Rita nears

NEW YORK - Crude-oil prices rose more than $1 a barrel Wednesday as traders braced for the possibility that Hurricane Rita could smash into key oil facilities in Texas.

Workers fled oil rigs in the Gulf of Mexico less than a month after Hurricane Katrina tore through the same region, as Rita strengthened into a Category 4 hurricane Wednesday.

"Prices are going to be driven directly by the projected path of the storm," said John Kilduff, analyst at Fimat USA. The National Hurricane Center said Rita could reach Category 5 status, and is likely to hit Texas, the heart of U.S. oil production.

Light, sweet crude for November delivery rose $1.25 to $67.45 a barrel in afternoon trading on the New York Mercantile Exchange, after surging as high as $68.27 earlier Wednesday.

Heating oil jumped more than 3 cents to $2.045 a gallon, while gasoline surged nearly 9 cents to $2.075 a gallon. Natural gas reached a new peak of $12.900 per 1,000 cubic feet before easing slightly to $12.85.

On London's International Petroleum Exchange, November Brent crude oil futures gained 97 cents to $65.17 a barrel.

Data showing that gasoline and distillate fuel inventories rose in the last week came as a surprise to analysts and helped prices ease off highs, but the calming effect was limited.

"It's a silver lining, but it's not positive enough to get traders to stop staring down Rita," Kilduff said.

The U.S. Department of Energy said Wednesday the nation's gasoline inventories rose 3.4 million barrels to 195.4 million barrels in the week ended Sept. 16, still more than 5 percent below year-ago levels.

Inventories of distillate fuels, which include heating oil, rose 800,000 barrels to 134.1 million, more than 5 percent above year-ago levels.

Crude inventories dropped 300,000 barrels to 308.1 million, but are nearly 12 percent above year-ago levels.

Crude oil 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 Rita's winds have reached 140 mph and is predicted to reach land Saturday somewhere between northern Mexico and western Louisiana, most likely along the central Texas Gulf Coast between Galveston - which is near Houston - and Corpus Christi.

The U.S. Minerals Management Service said Wednesday that 469 platforms in the Gulf are unstaffed - up sharply from 136 on Tuesday. More than 73 percent of oil production in the region is blocked, up from 58 percent Tuesday. More than 47 percent of gasoline production, up from 35 percent, is also blocked.

"Some of those refineries in Texas, they're at sea level. It's a table top, it floods every easily," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.

Oil refining in Texas accounts for a quarter of the nation's total output. Rita is also thwarting recovery efforts as refineries gear up for the Northern Hemisphere winter, the peak season for production of distillate fuels, which include heating oil, jet fuel, kerosene and diesel.

Silliere added that disruption to diesel production could hurt harvest season in the Midwestern United States.

The oil industry has lost production of more than 26 million barrels of oil since Aug. 26 - about 4.7 percent of the Gulf's yearly oil output, MMS said.

Numerous companies - Valero Energy Corp., BP PLC, Shell Oil, Apache Corp., Exxon Mobil Corp., ConocoPhilips Co., Chevron Corp., Anadarko Petroleum Corp. and Marathon Oil Corp. - have abandoned facilities in the Gulf of Mexico ahead of Rita.

Markets were also watching developments in Nigeria, the world's eighth-largest oil exporter, where a militia threatened to blow up oil installations if the government did not release its leader, whom police arrested for alleged treason.


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