Friday, Sept. 9, 2005 | 9:46 a.m.
VIENNA, Austria -- Crude oil prices rose above $65 a barrel today after the U.S. Department of Energy said energy costs this winter in the United States would be the highest in 10 years.
Oil futures rose for a second consecutive day as more damage reports from Hurricane Katrina filtered in, with U.S. Energy Secretary Sam Bodman saying at least four refineries in the U.S. Gulf Coast would remain off-line for months.
The International Energy Agency lowered its projected growth in oil demand this year and next -- but only in part due to Katrina, saying high prices were choking demand even before the storm hit. The Paris-based agency said daily world oil demand this year would grow by 1.35 million barrels to 83.48 million barrels -- 250,000 barrels less than its previous forecast. The energy watchdog also cut its estimate of demand growth by the same amount for next year to 85.25 million barrels a day.
Light sweet crude for October delivery on the New York Mercantile Exchange rose 83 cents to $65.32 by afternoon in Europe. Nymex crude is more than $5 off its peak of $70.85 a barrel briefly reached during the day on Aug. 30, but is still almost 50 percent higher than a year ago.
On London's International Petroleum Exchange, October Brent futures gained 71 cents to $63.79 a barrel.
Gasoline rose marginally to $2.0430 a gallon. Heating oil rose nearly 3 cents to $1.9584 a gallon, while natural gas rose more than 11 cents to $11.46 per 1,000 cubic feet.
Vienna's PVM Oil Associates forecast continuing demand for heating oil -- in part as a substitute for natural gas caused by Katrina's destruction.
"A high portion of natural gas production has not fully returned to normal levels, leading prices for natural gas relatively high," said PVM's Energy Market Report, adding that -- comparatively -- "fuel-oil rich (crude) grades supplies by OPEC countries are rather cheap at the moment."
In Seoul, finance ministers at the Asia-Pacific Economic Cooperation forum said high oil prices are a risk to economic growth and called for more investment in oil production and renewable energy sources.
The U.S. Energy Department said Thursday that crude oil inventories fell 6.4 million barrels in the week ending Sept. 2. At 315 million barrels, crude inventories are still 13 percent above year-ago levels.
Gasoline inventories dropped 4.3 million barrels to 190.1 million, 9 percent lower than a year ago. Distillate fuel inventories -- which include heating oil -- fell 800,000 barrels to 134.4 million, 3 percent higher than a year ago.
Analysts had already expected drops in petroleum stocks across the board after Katrina sliced through key U.S. energy infrastructure and import terminals, but the decline in gasoline was less than expected.
"Here's the concern," said Purvin & Gertz analyst Victor Shum. "We're heading into the last quarter of the year, the winter peak demand season. Energy costs for consumers and industries certainly will be high."
The Energy Information Administration, a division of the U.S. Energy Department, revised figures for winter following Katrina and said:
"For all of 2005, energy expenditures in the United States are expected to be $1.08 trillion, approximately 24 percent above the 2004 level," the EIA said in its short-term energy outlook.
"This level of expenditures represents approximately 8.7 percent of annual gross domestic product, compared to 6.2 percent as recently as 2002, and is the highest percentage since 1985 at 10.4 percent," the report said.
Winter is traditionally a peak season for distillates.
In the U.S. Gulf Coast, shut-in oil production was 60.12 percent of the daily total, according to daily update from U.S. federal Minerals Management Service. The latest figure for halted oil production stands at 901,726 barrels per day, while 4.02 billion cubic feet a day of natural gas output remains locked up.
Four refineries remain shut: Chevron Corp.'s Pascagoula, Exxon Mobil-PdVSA's Chalmette, ConocoPhillips' Alliance and Murphy Oil Corp.'s Meraux. Those remaining facilities are likely to remain shut for months, the U.S. energy secretary said.
"It's roughly 4 percent to 5 percent of the American refinery capacity will be delayed and starting up I would guess in another couple of months," Bodman said in a CNBC interview.
Royal Dutch Shell, meanwhile, said that production is now flowing and increasing from all Shell-operated assets in the Western Gulf of Mexico that were shut because of Katrina.
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