Oil slips as U.S. recovers from Katrina
Reuters | September 6, 2005
Oil prices slipped on Tuesday as America's battered oil refining operations made a fuller recovery from last week's hurricane.
U.S. crude by 1500 GMT was down $1.33 at $66.24 a barrel. London Brent was up 20 cents at $65.05.
Crude prices are down from last week's record levels as industrialized countries prepared to release oil from emergency stocks. But concern lingered about the loss of refinery production and speed of the recovery.
"At the moment, it still seems like a very slow process," said Michael Davies, an analyst at brokerage Sucden Ltd. "I'm not sure that it will start up again so quickly."
More than two-thirds of U.S. Gulf of Mexico oil production was still shut in on Monday, improving from more than three-quarters on Saturday, the U.S. Minerals Management Service said.
Five of the eight storm-hit refineries on the Gulf coast have now relit their flares, indicating operations are about to get under way.
But three refineries -- Louisiana's 190,000 bpd Chalmette and 247,000 bpd Belle Chasse plants plus the 325,000 bpd Pascagoula operation were still assessing damage.
"Much will depend on how quickly these U.S. refineries get back on their feet," said Colin Tang, an oil trader at investment bank Caylon in Singapore.
Marathon Petroleum Company LLC's <MRO.N> 245,000 barrel per day (bpd) refinery in Garyville, Louisiana, began the restart process on Monday, the company said.
Valero Energy Corp.'s <VLO.N> 185,000 bpd St. Charles refinery in Norco, Louisiana, had its electrical power restored and expected to restart by the middle of the week, Valero said Monday.
Motiva Enterprises LLC's <RDSa.L> 235,000 bpd refinery in Convent, Louisiana, has restarted and is moving to full production. The Motiva 227,000 bpd Norco, Louisiana, refinery, was expected to begin restart by mid-week, the company said.
Murphy Oil Corp.'s <MUR.N> 125,000 bpd Meraux, Louisiana, refinery had lit its flare stacks but was contending with a leak of crude oil from an 85,000-barrel storage tank at the plant.
Worries about the speed of recovery dampened the impact of the International Energy Agency's (IEA) move to release 2 million barrels per day (bpd) of oil over the next 30 days, the first time the IEA has tapped its members 1.5 billion barrel government stocks since 1991.
"There's a freight shortage at the moment," Sucden's Davies said. "They're going to struggle getting a lot of it over there."
It was also still not clear how much of the IEA release would comprise oil products such as gasoline, coming as U.S. retail price increases worry motorists and businesses.
"The release of strategic reserves contains a very large component of unneeded crude oil, and does little to directly impact on the actual supply gap of U.S. oil products," said Barclays Capital in a report.
Gasoline futures in New York <HUV5> were 0.12 cents lower at $2.1825 a gallon, after leaping to an intraday record of $2.92 a gallon last week.