Katrina disrupts Gulf Coast, rattles energy markets

30-Aug-05

Oil futures briefly climbed above US$70 a barrel for the first time, as Hurricane Katrina has disrupted Gulf Coast petroleum output and rattled energy markets, spiking oil and natural gas prices. Over 700 offshore platforms and rigs had been evacuated, two rigs had drifted away and a bridge over the Mobile River was closed after it was struck by a runaway platform. The Gulf of Mexico normally produces 2 million bpd of crude oil, or about 35% of the United States' domestic output. 92% of the region's oil output was shut-in, or shut down, with more than 3 million barrels of production lost since Friday. It is estimated that total refinery production of gasoline, heating oil, diesel and other fuels could fall by as much as 20 million barrels over the next 60 days. These damages compound the already severe supply problems being faced by the energy markets, producers worldwide struggle to keep up with strong demand that threatens to constrain the supply of home heating fuels this winter. Citgo Petroleum Corp. requires 250,000-500,000 barrels to ensure that its Lake Charles refinery is functioning. The Bush administration would consider lending oil from the nation's emergency stockpile to refiners that request for it. OPEC will propose a production increase of 500,000 bpd at its meeting next month. Light sweet crude for October delivery settled at US$67.20 a barrel, an increase of $1.07. Oil prices would need to rise to about $90 a barrel to match the highs of 25 years ago, pipelines and resulted in the loss of nearly 44 million barrels of oil production and natural gas output decline by 172 billion cubic feet between September 2004 and February 2005.