Sep 2005 Financial News

Oil dips after storm fear surge

Sep 20, 2005

LONDON, England (Reuters) -- Oil fell below $67 after surging 7 percent the previous session as a fresh storm headed towards the Gulf of Mexico, threatening more supply disruptions less than a month after Hurricane Katrina.

The International Energy Agency said it would consider extending its 30-day oil rescue plan to the U.S. if the storm causes major disruptions to supplies.

U.S. light crude traded down $1.20 at $66.19 a barrel, after surging $4.39 on Monday. Light crude hit a record $70.85 on August 30, a day after Katrina struck.

The contract fell 12 percent over the following two weeks after the IEA's decision at the beginning of the month to release 2 million barrels a day of crude and oil products to help the world's biggest consumer through an energy crisis.

London Brent crude was down $1.09 at $64.52, after leaping $3.80 on Monday.

Tropical Storm Rita is expected over Florida on Tuesday, then develop into a hurricane after passing over warm Gulf waters, meteorologists said.

The storm comes even as U.S. crude oil facilities continue to recover from Katrina, with four refineries still shuttered and more than half of offshore Gulf of Mexico oil production shut in.

"It looks like she could have an impact on facilities that were untouched by Katrina," said David Thurtell, commodities strategist at the Commonwealth Bank of Australia in Sydney.

"While we don't really know where she will go at present, it really is a case of kicking a man while he's down."

Forecasts showed Rita set to enter the Gulf of Mexico, which accounts for about a third of domestic oil production, then make landfall this weekend in Texas, home to about a quarter of the country's refining production.

The threat to fuel supplies sent gasoline prices 14 percent higher on Monday. Gasoline futures were down 7.07 cents at $1.9720 a gallon on Tuesday.

The focus on the storm and a global refining system operating at full stretch overshadowed moves by the Organization of the Petroleum Exporting Countries (OPEC) to find a way to dampen crude prices up more than 50 percent so far this year.

The cartel is expected to sign off on a deal on Tuesday to make available its spare 2 million bpd production capacity, rather than an immediate increase in oil output that some consumers had urged.

"We have the 2 million available if there is a call for it -- there is no need for raising the ceiling," said OPEC president Sheikh Ahmad al-Fahd al-Sabah.

Tuesday, 20th September, 2005
http://edition.cnn.com/2005/BUSINESS/09/20/oil.prices.reut/index.html