Crude-oil futures surge by over US$4 as Rita strengthens

20-Sep-05

Crude oil futures recorded the biggest one-day price jump ever of US$4, a 6.9% jump, as Tropical Storm Rita gained strength off the Bahamas and could hit U.S. oil facilities in the Gulf of Mexico later this week. If Rita is to strike this region, it will be yet another major blow to an industry in a region struggling to recover from Hurricane Katrina. Benchmark light, sweet crude for October delivery rose by US$4.39 to settle at US$67.39 a barrel on the New York Mercantile Exchange. Brent crude for October delivery rose by US$3.80 to US$65.61 on London's IPE. Rita continued to gain speed off the Bahamas about 610 kms from Key West. Rita has strengthened into a tropical storm on Sunday, and was forecast to be in the Straits of Florida between the Keys and northern Cuba on Monday, possibly as a Category 1 hurricane with winds of at least 74 mph (119 kph). If Rita strikes Texas, the biggest oil refiner in the country, it could spell serious disruption to the industry. Texas has 26 petroleum refineries, most of which are located along the coast, with the capacity to pump 4.6 million bpd- over 25% of the U.S. total refining capacity. Already 55% of oil production and 35% of gasoline production in the Gulf remains blocked due to Hurricane Katrina. Supply concerns are likely to increase as the Northern Hemisphere winter approaches, when demand for petroleum products such as heating oil, diesel and jet fuel rise. In a move to reassure oil markets that supplies are plentiful, OPEC plans to make available, an extra 2 million bpd. OPEC is to decide on Tuesday whether to offer the extra oil or boost the current output ceiling of 28 million barrels a day by 500,000 barrels.