Price of oil rises as hurricane Ike bears down on Texas coast refineries
By midday in Europe, light, sweet crude for October delivery rose $1.38 to $102.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.71 overnight to settle at $100.87 after dropping as low as $100.10 per barrel. The last time Nymex crude traded below the $100 mark was April 2.
Exxon Mobil Corp., Valero Energy Corp., ConocoPhillips and Marathon Oil Co. have begun halting operations as Ike headed straight for the region’s biggest complex of refineries and petrochemical plants. U.S. wholesale gasoline prices spiked 30 per cent Thursday.
“According to estimates made by the Minerals Management Service, about 97 per cent of crude production and more than 93 per cent of gas output in the U.S. part of the Gulf of Mexico were idle in preparation for the storm,” wrote analysts from JBC Energy in Vienna, Austria.
“In addition, some 11 refineries, which represent more than 16 per cent of total U.S. refining capacity, have shut down operations.”
“You have some refineries shutting to prepare for hurricane damage,” Tetsu Emori, a commodity markets fund manager with ASTMAZ Futures Co. in Tokyo. “That’s triggered some buying, especially in oil products such as gasoline and heating oil.”
Early Friday, the storm was centerd about 595 kilometres southeast of Galveston, Texas, moving to the west-northwest at 19 kilometres per hour. Top sustained winds were 160 km/h.
The storm was expected to strike the Texas coast late Friday or early Saturday. Forecasters said the storm was likely to come ashore as a Category 3, with winds up to 210 km/h. The upper Texas coast accounts for one-fifth of U.S. refining capacity.
Ike is huge, taking up nearly 40 per cent of the Gulf of Mexico. The National Hurricane Centre said tropical storm-force winds of at least 63 km/h extended across more than 820 kilometres.
Ike, along with last week’s hurricane Gustav, have helped keep oil prices from falling faster, as concerns over a slowdown in global economic growth have pushed prices down from a record $147.27 set on July 11.
“Oil demand on a global basis is quite pessimistic,” Emori said. “If it wasn’t hurricane season, crude would be under $100 already.”
In other Nymex trading, heating oil futures rose 2.75 cents to $2.943 a gallon, while gasoline prices gained 5.87 cents to $2.807 a gallon. Natural gas for October delivery fell 1.6 cents to $7.232 per 1,000 cubic feet.
In London, October Brent crude rose $1.42 to $99.06 a barrel on the ICE Futures exchange, after it closed overnight at a six-month low.