MARKET WATCH Hurricane Rita raises energy prices

Sept. 22, 2005
Energy prices rebounded Sept. 21 as Hurricane Rita, the third largest storm ever to threaten the US, roared through the Gulf of Mexico toward the upper Texas coast.

Sam Fletcher
Senior Writer

HOUSTON, Sept. 22 -- Energy prices rebounded Sept. 21 as Hurricane Rita, the third largest storm ever to threaten the US, roared through the Gulf of Mexico toward the upper Texas coast.

On the morning of Sept. 22, the Category 5 hurricane was 490 miles southeast of Galveston, Tex., moving to the north-northwest at 9 mph. The eye of the storm was projected to hit Galveston Bay early on Sept. 24.

Highways out of Galveston and nearby Houston were packed Sept. 21-22 with the mandatory evacuation of some 1.3 million people in the Galveston-Houston-Corpus Christi area, in addition to several thousands of residents along the western coast of Louisiana.

The Texas Gulf Coast has four concentrations of refineries with capacities totaling 4 million b/d, about 23% of total US refining capacity. There are four refineries in the Beaumont-Port Arthur area with combined capacity of 1 million b/d, six in and around Houston with 1.6 million b/d, three in Texas City with 740,000 b/d, and four in Corpus Christi with 690,000 b/d.

No single storm can hit all those refineries with hurricane-force winds, but all were considered in jeopardy as long as Rita remained in the Gulf of Mexico.

Industry prepares for Rita
Shell Oil Co. said its Shell Deer Park Refinery began an orderly shutdown of its refining and chemical facilities Sept. 21 and expected be completed late Sept. 22. Motiva Enterprises LLC said it was closely monitoring hurricane developments and had contingency plans in place for its three Gulf Coast refineries in Port Arthur, Tex., and in Convent and Norco, La. Meanwhile, all three refineries continued to operate normally.

In compliance with requests by city officials, Shell closed its downtown Houston offices Sept. 21-22 in preparation for Hurricane Rita.

Valero Energy Corp., San Antonio, said it expected to complete shutdowns of its 135,000 b/d Houston and 243,000 b/d Texas City refineries by noon Sept. 22. The company's 250,000 b/d Port Arthur refinery was reduced to minimum rates early Sept. 22 as it began shutting down.

Valero maintained skeleton crews to operate its 340,000 b/d Corpus Christi and 98,000 b/d Three Rivers refineries. Both of those facilities "are operating at slightly reduced rates due to feedstock and product storage issues, but it is currently anticipated that these refineries will be able continue to run with skeleton crews in place," the company said Sept. 22.

ExxonMobil Corp. said Sept. 22 that it was in the process of shutting down operations at its Baytown and Beaumont, Tex., refineries and chemical manufacturing facilities but that its Baton Rouge, La., refining and chemical operations were not affected.

Four Gulf Coast refineries with a combined capacity of 900,000 b/d—Chevron Corp. in Pascagoula, Miss.; ConocoPhillips, Belle Chasse, La.; ExxonMobil Corp., Chalmette, La.; and Murphy Oil Corp., Meraux, La.—were disabled by Hurricane Katrina, which hit the Louisiana coast Aug. 29.

The US Minerals Management Service said 605 platforms and 87 drilling rigs in the Gulf of Mexico were evacuated as of Sept. 21, including 83 platforms and 2 rigs to which crews had not returned after Katrina. It said nearly 1.4 million b/d, or 91.9%, of oil production and 6.6 bcfd, or 66%, of natural gas production in the gulf were shut in ahead of the latest storm.

Cumulative gulf production lost since Aug. 26, when Katrina threatened offshore operations, now totals 28.5 million bbl of oil and 131.8 bcf of natural gas, said MMS on Sept. 22.

At their Sept. 20-21 meeting in Vienna, ministers of the Organization of Petroleum Exporting Countries promised to release the cartel's remaining 2 million b/d of spare production capacity for a period of 3 months, starting Oct. 1, if needed (OGJ Online, Sept. 21, 2005).

The Energy Information Administration said Sept. 22 that 74 bcf of natural gas was injected into US underground gas storage in the week ended Sept. 16. That compares with injections of 89 bcf the previous week and 68 bcf during the same period in 2004. US gas storage now stands at 2.8 tcf, down by 100 bcf from this time last year but 92 bcf above the 5-year average.

EIA earlier reported commercial US inventories of crude dipped by 300,000 bbl to 308.1 million bbl during the week ended Sept. 16. Distillate fuel stocks increased by 800,000 bbl to 134.1 million bbl, while gasoline inventories jumped by 3.4 million bbl to 195.4 million bbl.

Energy prices
The new front-month November contract for benchmark US sweet, light crudes gained 60¢ to $66.80/bbl Sept. 21 on the New York Mercantile Exchange. The December contract increased by 40¢ to $66.79/bbl. Gasoline for October delivery jumped by 7.65¢ to $2.05/gal with Gulf Coast refineries again under threat. Heating oil for the same month rose by 2.74¢ to $2.04/gal. The October natural gas contract escalated by 10.2¢ to $12.59/MMbtu on NYMEX.

In London, the November contract for North Sea Brent crude increased by 53¢ to $64.73/bbl on the International Petroleum Exchange. The October contract for gas oil leaped by $24.50 to $623.75/tonne

The average price for OPEC's basket of 11 benchmark crudes gained 60¢ to $58.90/bbl.

Contact Sam Fletcher at [email protected].