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Crude oil prices ease after robust rally
Crude oil prices eased Tuesday after a robust rally a day earlier amid concerns about supplies of oil products as refinery damage by Hurricane Rita is being assessed.
But he reiterated his country's stance that there was enough spare crude to meet demand and that the problem instead was the lack of refineries, adding that environmental concerns had hampered new construction. Light sweet crude for November delivery on the New York Mercantile Exchange fell 60 cents to $65.22 a barrel in electronic trading by midday in Europe. It had risen $1.63 to settle at $65.82 Monday in New York on Monday after U.S. President George W. Bush said it was unclear how much oil production would be lost as a result of Rita. Heating oil, a main worry as the Northern Hemisphere winter approaches, fell 3.5 cents to $2.0235 a gallon. Gasoline slipped 2 cents to $2.1110 a gallon. On London's International Petroleum Exchange, November Brent futures fell 56 cents to $63.37 a barrel. While Rita inflicted less damage than expected, crude output in the Gulf of Mexico was still shut down and at least 16 refineries in Texas were closed after the storm blew through over the weekend, according to the U.S. Department of Energy. "Products are a huge risk in the market at the moment and I wouldn't be surprised to see those prices rally in the near future," said Sandra Ebner, energy analyst at Deka Bank in Frankfurt. "With all the refinery problems in the U.S., everybody is seeking higher quality crude oil, which is easier to process, and this is keeping pressure on Nymex and Brent futures," she added. Naimi said there were now economic incentives to build more refineries, but environmental issues "make it more difficult to overcome these bottlenecks in the system." He added that current investment will bring new production capacity on stream in three to four years and that world oil reserves were sufficient to supply global energy needs for the foreseeable future. Early estimates were that Hurricane Rita will cost U.S. refiners about 800,000 barrels a day in capacity, on top of a drop about 900,000 barrels a day because of Hurricane Katrina. Market-watcher Energyintel put the number of lost barrels from Rita even higher. "While Hurricane Rita did not deliver the knockout blow ... (it) could result in the loss of 1.1 million barrels per day of capacity for up to a month," Energyintel said. "That seems sure to add huge new strains to already tight gasoline, jet fuel and heating oil markets." The storm also knocked off-line 78 percent of natural gas output in the Gulf of Mexico, the U.S. Minerals Management Service said. Oil companies were still assessing the damage at their refineries in the Houston area, the heart of U.S. petroleum production. Valero Energy Corp. said its 255,000-barrel-a-day Port Arthur, Texas, facility remains down but it expected refineries in Houston and Texas City to be back to normal later this week. Exxon Mobil Corp. was studying damage at its refinery in Beaumont, Texas. Meanwhile, Chevron Corp. said Tuesday that it has restarted production at both oil platforms in Nigeria that it shut down due to threats by a militia last week. The two account for output of 27,000 barrels per day.
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