Hurricane drives up oil prices

Crude oil futures surged past $70 a barrel for the first time today as Hurricane Katrina headed toward the heart of US oil and refinery operations in the Gulf of Mexico, shutting down an estimated one million barrels of refining capacity.

The storm was advancing on an area crucial to the US energy infrastructure - offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi.

“This is the big one,” said Peter Beutel, an oil analyst with Cameron Hanover. “This is unmitigated, bad news for consumers.”

Light, sweet crude for October delivery on the New York Mercantile Exchange jumped as much as $4.67 a barrel in Singapore to hit a high of $70.80 a barrel before slipping to $69.22. That’s up $3.09 from its close on Friday in New York.

Petrol traded at $2.1355 a gallon, up 20 cents or 12 per cent, while heating oil rose more nearly 16 cents to $1.9955 a gallon.

Katrina has already forced the shutdown of an estimated one million barrels of refining capacity and curbing offshore production, but analysts said the storm’s potential damage to facilities was even more worrying.

“It’s not only the suspension of production that’s causing concern, it’s the fact that we could see potential damage to the platforms, which would cause longer disruptions to production,” said energy analyst Victor Shum of Texas-headquartered Purvin & Gertz in Singapore.

The Gulf of Mexico normally produces 1.5 million barrels of crude oil a day, or about a quarter of the United States’ domestic output, according to the US Mineral Management Service.

“It looks like the perfect storm to drive prices up,” Shum said.

“If this thing knocks out significant quantities of refining capacity … we’re going to be in deep, dark trouble,” said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.

Some analysts have said the only way to rein in surging prices would be for the US to tap some of its petroleum reserves.

“President Bush could announce a release of supply from the Strategic Petroleum Reserve,” said commodity strategist David Thurtell of Commonwealth Bank of Australia in Sydney. “(That’s) the only thing that will prevent further significant price rises from here.”

The Bush administration has said the petroleum reserves should be tapped only when there are disruptions of oil imports from overseas.

Oil companies evacuated workers and shut down more than 600,000 barrels of daily production in the Gulf.

ChevronTexaco Corp. evacuated all workers in the eastern and central Gulf of Mexico and nonessential workers in the western Gulf late on Saturday, but company spokesman Matt Carmichael said Chevron will continue to produce 90% of its normal production by remote.

Royal Dutch-Shell Group, BP PLC and ExxonMobil Corp. also evacuated offshore workers by Saturday.

The Louisiana Offshore Oil Port, the largest oil import terminal in the US, evacuated all workers and stopped unloading ships on Saturday.