World oil prices rose by more than US$1 in Asian trading yesterday after Hurricane Gustav forced the shutdown of almost all oil production in the Gulf of Mexico.
New York’s main contract, light sweet crude for delivery in October, rose US$1.17 to US$116.63 a barrel from its close of US$115.46 on Friday at the New York Mercantile Exchange. Brent North Sea crude for October gained US$1.04 to US$115.09 from US$114.05 in London on Friday.
About one-quarter of US oil production comes from the Gulf, but US officials said on Sunday that more than 96 percent of Gulf oil production and 82 percent of natural gas output had been stopped in the face of the storm.
“It’s all about Gustav,” said Tony Nunan of Mitsubishi Corp’s international petroleum business in Tokyo.
Heavy winds and rains began battering the Gulf Coast yesterday, although the eye of the storm was not expected to make official landfall until later in the day.
Nunan said price gains had been limited because of underlying worries about a global economic slowdown and falling demand for oil.
World oil prices have sunk from record highs above US$147 a barrel in early July after surging from US$100 at the start of the year.
Monday’s rise of about US$1 was “not really that much,” Nunan said, adding that trading would be thin because the US markets were shut for the Labor Day holiday yesterday.
If oil facilities survive the storm undamaged, the oil price could continue its trend down. But damage on the scale of Hurricane Katrina three years ago could generate a price surge to US$120, Nunan said.
The threat of Gustav raised grim memories of the 2005 hurricanes Katrina and Rita that damaged or destroyed about 165 of around 4,000 oil platforms in the Gulf.
US energy giant ExxonMobil said on Sunday it had completed storm preparations for its Gulf Coast oil and gas operations. Workers on offshore platforms had been evacuated, the company said.
“We are also releasing personnel from onshore facilities anticipated to be in or near the path of the storm,” it said in a statement, adding the company expected to continue supplying its customers.
One of ExxonMobil’s refineries, in Chalmette, Louisiana, was being shut down, but Exxon’s other refineries and chemical plants on the Gulf Coast remained in operation as of Sunday, the company said.
Shell, in addition to its offshore facilities, was also shutting a number of its coastal refineries and chemical plants while putting others on standby.
British oil group BP and US rival ConocoPhillips also evacuated offshore workers.
Oil industry analyst Andy Lipow, based in Houston, Texas, said there would be a supply disruption, “but how quickly can the industry recover is going to be the key.”
Lipow said the oil industry was now better prepared for storms, both with offshore and onshore facilities.
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