Oil, Gasoline Fall After Hurricane Rita Spares Refineries

Sept. 26 (Bloomberg) -- Crude oil prices plunged to a two- week low and gasoline declined after Hurricane Rita struck only a glancing blow to Houston's oil hub. Most of the 15 refineries closed as Rita approached are beginning to start up. Rita hit the Texas-Louisiana border on Sept. 24 with winds of 120 mph after veering away from Houston and Galveston, home to 12 percent of the U.S. refining capacity. Exxon Mobil Corp. said yesterday it began delivering gasoline from its Baytown refinery, the U.S.'s largest. "The refining sector dodged a bullet,'' said David Pursell, a partner at Pickering Energy Partners in Houston. "It looks like refineries are off for weeks, not months.'' Crude oil for November delivery fell 69 cents, or 1.1 percent, to $63.50 a barrel at 10:55 a.m. on the New York Mercantile Exchange. In earlier trading prices touched $62.65, the lowest since hitting $62.55 on Sept. 12. Futures have fallen 10 percent since touching a record $70.85 on Aug. 30, the day after Hurricane Katrina made landfall. Prices are 28 percent higher than a year ago. Gasoline for October delivery fell 9.06 cents, or 4.3 percent, to $1.995 a gallon on the Nymex. Prices touched $2.92 a gallon on Aug. 31, the highest since trading began in 1984. Futures are 48 percent higher than a year ago. The Nymex and London's International Petroleum Exchange offered weekend trading yesterday because of Rita. Both exchanges incorporated yesterday's trades as part of today's session. Oil production in the Gulf, which accounts for about 30 percent of U.S. output, was completely halted because of Rita and Katrina, the U.S. Minerals Management Service said yesterday.

Chevron Corp. said its Typhoon platform in the Gulf was "severely'' damaged after Rita. The platform was severed from its mooring and is being secured, the San Ramon, California-based company said in a statement today. "The real issue is offshore production,'' Pursell said. Rita became a Category 5 hurricane on the five-tier Saffir- Simpson scale before coming ashore, with winds of more than 155 mph as it swept over oil and gas production facilities. Damage to oil production platforms such as Chevron's Typhoon shows how strong the winds and waves from Rita were, Pursell said. Texas is home to the biggest concentration of U.S. refineries, accounting for 26 percent of the nation's total capacity. Valero Energy Corp., the nation's biggest refiner, said its Houston and Texas City refineries may restore processing this week. Exxon, the world's largest publicly traded oil company, said with terminals and pipelines reopened, it has resumed delivering gasoline from its Baytown refinery. Initial assessments of the Beaumont refinery and chemical-plant operations don't show any significant damage, Exxon said. About 5 percent of U.S. refining capacity remains closed because of Katrina.Four plants are scheduled to resume output in November or December at the earliest. Gasoline and other fuel pipelines operated by Colonial Pipeline Co. and Explorer Pipeline Co. closed because of Rita. Explorer, which normally ships 10 percent of the Midwest liquid fuel supply, is "up and running at reduced rates'', said Tom Jensen, director of operations. The pipeline resumed operations from Texas to Tulsa today and expects to resume deliveries to St. Louis and Chicago tonight or early tomorrow, Jensen said. Colonial, the world's largest operator of petroleum-product pipelines, said yesterday it resumed operation at its pipelines originating in Houston and Pasadena, Texas, and would be running at 42 percent of capacity. It expected to increase that to 54 percent of capacity today and 72 percent by tomorrow, the Alpharetta, Georgia, company said in a release.

At the pump, the average U.S. retail price yesterday rose 5.2 cents to $2.80 a gallon, according to the AAA motorists' group. It reached a record $3.057 on Sept. 2, the week Katrina hit. Gasoline futures, which serve as wholesale prices, rose 17 percent last week. That increase will translate into higher pump prices, Pursell said. It's too early to know if Rita and Katrina have affected underlying demand for gasoline, he said. "Are people really driving less?'' Pursell said. Other energy companies operating in the Gulf reported little damage from Rita. Kerr-McGee Corp., Southern Union Co. and Cheniere Energy Inc. said assets were little damaged after the storm blew through the area two days ago. Kerr-McGee's major deepwater facilities in the western Gulf had no damage, the Oklahoma City-based company said today in a statement. The Neptune facility is ready to restart as soon as pipelines are ready, the company said. Southern's preliminary assessment of its Trunkline LNG asset in Lake Charles, Louisiana, shows the infrastructure is intact, the Scranton, Pennsylvania-based company said in a statement. The site will remain shut pending further inspection, Southern said. Cheniere, based in Houston, said in a statement it found ``negligible'' impact from Rita at its Sabine Pass site in west Cameron Parish, Louisiana. Brent crude for November settlement fell 39 cents to $62.05 on London's International Petroleum Exchange. It reached a record $68.89 after Katrina hit last month.