Oil prices fall as Rita avoids refineries

US oil prices fell yesterday after Houston refineries escaped serious damage from Hurricane Rita, although plants further east in Port Arthur and Lake Charles were hit harder.

London Brent crude, open for a special weekend session on the International Petroleum Exchange, was off 94 cents at $61.50 a barrel after sliding $2.16 on Friday.

The New York Mercantile Exchange crude was also open for trading yesterday.

Rita made landfall early on Saturday as a category three hurricane having eased from a full strength category five, arriving just four weeks after Hurricane Katrina sent crude prices to a record $70.85 a barrel.

At first glance, Rita appeared to have been much less damaging to the refining industry than Katrina, which crippled four big refineries with long-term damage.

“It could have been a heck of a lot worse. I have the feeling that we will bounce back quickly,” was the assessment of Phil Flynn, analyst with Chicago-based Alaron Trading, of the US oil industry’s post-storm recovery after Rita.

The US Department of Energy was “cautiously optimistic” that refineries in Houston suffered minimal damage, said spokesman Craig Stevens.

As company damage reports rolled in, it appeared that significant damage was done to at least one of the three refineries in Port Arthur, east of Houston.

Damage also was likely at the two refineries at Lake Charles, Louisiana where 15-foot storm surges were recorded but there was no immediate assessment from their operators.

Valero Energy estimated repairs at its Port Arthur plant would mean it takes two weeks to a month to restart its 250,000 barrel per day (bpd) refinery.

Royal Dutch Shell said its 285,000 bpd Motiva refinery in the same city had sustained some wind damage, but gave no estimate for a start-up date.

Total gave no immediate damage assessment and said it could give no estimate yet for when its 234,000 bpd Port Arthur plant would restart.

Many of the other Gulf Area refineries appeared to have survived unscathed and indications were that some with power around Houston were in start-up mode.

Exxon Mobil said that, based on an initial assessment, damage to its 557,000 barrel per-day Baytown, Texas, refinery - the largest in the United States - did not appear to be severe.

Ahead of Rita, operators also closed, as a precaution, all US. Gulf crude production. Half of the US Gulf operations still have to recover from Katrina, although heavy OPEC production and high crude oil stocks have alleviated crude supply concerns.

Most offshore operators said they had not yet been able to assess the damage to crude production facilities.

The International Energy Agency (IEA), which coordinated the release of 60 million barrels of strategic oil stockpiles after Katrina, met on Saturday to discuss Rita’s impact but said it had not made a decision on whether to expand the effort.