NEW YORK – Crude oil futures spiked to more than $70 a barrel for the first time as Hurricane Katrina took dead aim on America’s oil and refinery operations today, shutting down an estimated 1 million barrels of refining capacity and sharply curbing offshore production in the region.
Light, sweet crude for October delivery on the New York Mercantile Exchange climbed as much as $4.67 a barrel in electronic after-hours trading in Singapore to hit a high of $70.80 a barrel. Gasoline traded at $2.14 a gallon, up 21 cents, while heating oil rose more than 17 cents to $2.01 a gallon.
The area targeted by Katrina is crucial to the United States’ energy infrastructure — offshore oil and gas production, import terminals, pipeline networks and numerous refining operations throughout southern Louisiana and Mississippi.
Last September, Hurricane Ivan also swept across the region causing heavy damage and reducing the region’s output for months.
Katrina’s winds were fiercer.
Oil companies evacuated workers and shut down more than 600,000 barrels of daily production in the Gulf. Refiners closed down more than 1 million barrels of refining output by Sunday, but that amount could be higher because not every producer reports data, said Peter Beutel, an oil analyst with Cameron Hanover.
“This is the big one,” he said. “This is unmitigated, bad news for consumers.”
Gasoline futures soared more than 20 cents per gallon, above $2.12 per gallon, and natural gas was up $2.20 per 1,000 cubic feet in the opening minutes of trade. The “out of control” buying is spurred by the prospect that the region’s numerous refineries could be idled for weeks by flooding, power outages, or both, Beutel said.
The United States has ample crude oil supplies, even if major hurricane destruction trims Gulf oil output and foreign imports, but refining capacity is extraordinarily tight. As a result, prices for gasoline, heating oil, jet fuel and other products have flirted with records and could go even higher this week.
“If this thing knocks out significant quantities of refining capacity … we’re going to be in deep, dark trouble,” said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.
The market has been on edge for months, with traders and speculators buying on the slightest fear. With Katrina, all those fears could be realized, Beutel said. “Basically I could spill a can of oil at my local gas station and you’d see the price of crude go up by $1 per barrel,” he said.
Crude settled at $66.13 a barrel Friday on the New York Mercantile Exchange, down $1.36 after hitting $68 last week.
On Friday, Katrina had been expected to be inconsequential to the energy industry, with many traders selling. That all changed Saturday, when the system gained power and charged west, directly toward areas of offshore oil production.