Crude Oil Hits New Record in Wake of Katrina
he after-effects of Hurricane Katrina sent crude oil prices to a new record near $71 a barrel Tuesday as fuel traders braced for damage assessments of the storm on oil and gas rigs and refineries in the Gulf of Mexico and on the Gulf Coast.
Benchmark light sweet crude oil futures hit a record $70.85 a barrel in intraday New York Mercantile Exchange trading Tuesday before settling to close at $69.81, a record closing price, Bloomberg reported.
Oil prices had topped the $70 mark for the first time ever in overnight trading before the Nymex opened on Monday morning, reaching $70.80 as Katrina bore into Louisiana and Mississippi. (Click here for previous coverage.)
President Bush was reportedly still considering whether to open the nation's Strategic Petroleum Reserve to meet any crude-oil shortfalls in the wake of the storm, the Associated Press reported. (Click here for previous coverage.)
Meanwhile, gasoline and heating oil wholesale prices, which hit new closing-price highs on Monday, continued their upward climb early Tuesday, AP reported. Heating-oil futures are often a proxy for diesel, as they are both distillate fuels.
Wholesale unleaded gasoline trading was halted briefly after the price jumped more than a quarter a gallon, a limit, to more than $2, CNBC reported.
Analysts said that even if Katrina did less harm than feared, its effects were bound to tighten the availability of refined fuels, which could drive already high prices higher, AP said.
Retail diesel hit a record $2.59 a gallon Monday, while gasoline fell 0.2 cent off its record set a week earlier to $2.61, the Department of Energy reported. (Click here for previous coverage.)
Energy firm Global Insight issued a best-case forecast in which gasoline prices would reach $3 a gallon for two months and economic growth would decline by a half-percentage point in the fourth quarter, the Washington Post reported Tuesday.
The firm issued a worst-case scenario in which oil would jump to $100 a barrel, gasoline would reach $3.50 a gallon on average and a possible recession by the end of the year, the Post reported.
Meanwhile, the Interior Department's Minerals Management Service said Monday that 92% of the Gulf region's oil output was shut down, with more than 3 million barrels of production lost since Friday.
The Gulf of Mexico normally produces 2 million barrels of crude oil a day and about 10 billion cubic feet a day of natural gas.
At least eight Gulf Coast refineries shut down or reduced operations Monday, according to company and federal reports, though several others were not affected by the storm or had resumed normal operations by late Monday, AP said.
Valero Energy Corp., of San Antonio, Texas, said Monday that its St. Charles, La., refinery, which processes 260,000 barrels of crude oil per day, would be closed for at least a week, Knight Ridder newspapers reported.
