Oil prices storm higher with eye on Rita

Singapore (Platts)--22Sep2005

Benchmark crude prices were in the eye of the storm once again Thursday,
as Category Five Hurricane Rita in the Gulf of Mexico threatened to become the
worst storm ever to hit Texas. A market already spooked by the 900,000 b/d
short-term refining capacity outage in Louisiana and Mississippi caused by
last month's Hurricane Katrina drove oil prices higher on fears of a similar
impact on plants in Texas.
     The New York Mercantile Exchange's West Texas Intermediate crude contract
for November delivery vaulted by a dollar in the out-of-hours Access trade
late Thursday afternoon in Asia to trade at $67.80 at 0704 GMT. November Brent
changed hands at $65.45 in early electronic trading at 0706 GMT, up 72cts from
Wednesday's close on the International Petroleum Exchange. 
     Crude and products prices had come under bearish pressure Wednesday from
reports of gasoline and distillate stock builds in the US when the Department
of Energy released its weekly data, but on balance bowed to bullish sentiment
from the potential damage Rita could cause.
     DOE statistics showed a 3.4-mil bbl build in gasoline stocks in contrast
to a mere 400,000 bbl increase analysts had projected. Distillate stocks,
which include the winter heating oil in the US, grew 800,000 bbl, while crude
stocks dipped a modest 322,000 bbl, the DOE said.   
     Meanwhile, the US National Hurricane Center had a hurricane watch in
effect for the Gulf Coast from Port Mansfield in Texas to Cameron in
Louisiana, and reported Rita moving in bearing winds near 175 miles/hour (280
km/hour) in its latest 100 EDT (500 GMT) update.   
     
     TEXAS REFINERIES IN PRECAUTIONARY SHUTDOWN 
     Coastal Texas refiners began idling their plants Wednesday. Marathon Oil
said it had begun shutdown procedures at its 72,000 b/d Texas City refinery,
while Valero Energy began shutting down its 135,000 b/d Houston and 243,000
b/d Texas City refineries. Valero said it was keeping its 340,000 b/d Corpus
Christi refinery running at "planned rates" with a skeletal crew. Shell also
began shutting down its 333,700 b/d Deer Park refinery Wednesday.
     These outages come on top of the almost 900,000 b/d of refining capacity
in Louisiana and Mississippi that has been knocked out for months by Hurricane
Katrina, which hit the area Aug 29. 
     As oil and gas producers in the USG evacuated platforms ahead of Rita,
production shut-ins that had been limping back toward normalcy post-Katrina,
escalated. The US Minerals Management Service Wednesday reported 1.097-mil b/d
or 73.16% of the normal Gulf oil output of 1.5-mil b/d shut in. Gas output
curtailed was 4.713 Bcf/day, or 47.13% of the region's total.
     The hurricane episodes in the US have swept aside OPEC's latest crude
supply reassurances. The cartel at its meeting in Vienna Tuesday agreed to put
2-mil b/d of spare crude capacity on offer in the market for the final quarter
of this year, leaving its production ceiling unchanged at 28-mil b/d, once
again highlighting the shortage of refining capacity rather than crude.
     In OPEC member Nigeria, once again facing production disruptions, it was
"premature" to assess the recent militant threat to destroy oil wells and
pipelines in the Niger Delta, oil minister Edmund Daukoru told an oil
conference in London Wednesday.
     The militants have demanded immediate release of their arrested leader.
"It's premature to say what the outcome of the investigations [into the
threats] will be...[but] in the wake of recent experience around the globe, no
one is saying the threats should be taken lightly," Daukoru said.

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