Crude oil falls from record as storm may miss Gulf fields

Mark Shenk

Thursday, Aug. 25, 2005 | 11:29 a.m.

Crude oil and natural gas fell from records in New York on forecasts that Tropical Storm Katrina will probably miss oil and gas fields in the Gulf of Mexico.

"Prices rose on concern that the storm would veer to the west, but that doesn't look likely," said Joe Allman, an analyst at RBC Capital Markets in Houston. "It doesn't look like Katrina will hit the main oil and gas producing regions in the Gulf."

Katrina's maximum sustained winds were near 60 miles (97 kilometers) per hour and should hit the southeastern Florida coast tonight or Friday morning, the Miami-based National Hurricane Center said. The storm is then expected to move toward the state's panhandle, missing most oil and gas fields, which lie off the coasts of Louisiana and Texas.

Crude oil for October delivery fell 42 cents, or 0.6 percent, to $66.90 a barrel at 11:32 a.m. on the New York Mercantile Exchange. Futures began trading in 1983. Prices are up 54 percent from a year ago.

The fall in prices accelerated after a report showed that U.S. natural-gas supplies jumped in the week ended Aug. 19. Stockpiles rose by 60 billion cubic feet to 2.575 trillion cubic feet, the Energy Department said in a report released at 10:30 a.m. Analysts expected an increase of 58 billion cubic feet, according to the median of 21 estimates in a Bloomberg survey.

Natural gas for September delivery fell 54.4 cents, or 5.5 percent, to $9.44 per million British thermal units in New York. Futures closed at $9.984 yesterday, the highest since trading began in 1990. Prices are up 81 percent from a year ago.

Katrina's winds are forecast to reach hurricane strength, exceeding 73 mph, late today or early tomorrow, the Miami-based center said. Florida has no refineries and produced an average 8,000 barrels a crude-oil a day last year, government figures show. The U.S. produced an average 5.4 million barrels a day of crude oil in 2004.

Platforms in the Gulf of Mexico account for 24 percent of U.S. gas production and 30 percent of oil output. States along the Gulf receive more than half of U.S. oil imports and are home to 50 percent of the nation's refining capacity. Texas and Louisiana produced 1.2 million barrels a day last year, accounting for 24 percent of U.S. output last year.