Oil prices soared yesterday in the largest one-day gain ever as fears mounted that a developing tropical storm could damage oil operations in the Gulf of Mexico and Texas.
U.S. benchmark crude for October delivery gained $4.39 a barrel on the New York Mercantile Exchange to close at $67.39. That was the largest one-day dollar gain since oil started trading on the exchange in 1983, according to the Energy Department. The oil price closed at a record $69.81 on Aug. 30.
Futures prices for gasoline, natural gas and heating oil also rose yesterday.
The spike came as gasoline prices, which surged after Katrina, continued to fall. The national average was $2.786 a gallon for regular, down 16.9 cents from a week earlier, according to the Energy Department. The average price in the Washington area dropped under $3 for a gallon of regular, according to a AAA-sponsored survey.
The increases in futures prices of oil and gasoline reflected concerns that Tropical Storm Rita, which was strengthening off the Bahamas yesterday afternoon, could disrupt offshore oil and natural gas production and impair operations at Texas refineries that produce gasoline. Supplies already are tight because of damage from Hurricane Katrina to offshore production and Gulf Coast refineries.
The new storm "could be coming in right exactly where Katrina didn't go," said Michael Guido, director of commodity strategy in New York for French bank Societe Generale. "It could be a bad situation for all the platforms that didn't get hit before."
The price spike came as ministers from the Organization of the Petroleum Exporting Countries were considering whether to offer additional oil to the market. Traders said a move by OPEC would have little impact on the market because refineries don't have the spare capacity to process the varieties of oil that could become available.
Oil companies yesterday were evacuating hundreds of employees from platforms in the Gulf of Mexico by helicopter and boat, a standard precaution in advance of tropical storms and hurricanes. BP, for instance, said it was in the process of evacuating half of the 1,500 workers it has on platforms in the gulf.
Analysts said that pump prices should continue to fall but that yesterday's increases on Nymex mean they would not fall as much as they would have otherwise. Wholesale prices have dropped more quickly than retail prices, which have been catching up, they said.
"You may see local street prices drift lower," said Tom Kloza, chief analyst for the Oil Price Information Service of Lakewood, N.J. "That's how far behind pump prices were in catching up to the wholesale price."
Four major Gulf Coast refineries remain idle because of Katrina, according to the Energy Department. Even before that storm, analysts had said refining capacity worldwide was struggling to meet demand.
Now analysts say they are concerned that the developing tropical storm could hit Texas, home to about 27 percent of U.S. refining capacity, according to the Energy Department.
D. Mark Routt, an analyst with Energy Security Analysis Inc. of Wakefield, Mass., said Houston is an "extremely important hub" for pipelines and other oil industry operations, adding to concern about storm damage.
Analysts said that they were concerned about damage to oil production in the gulf but that those concerns were secondary to refining.
Nearly 56 percent of daily oil production in the Gulf of Mexico remained off line yesterday because of Katrina, amounting to almost 838,000 barrels a day, according to the Minerals Management Service.
The Energy Department said yesterday that it would lend more oil from the nation's Strategic Petroleum Reserve. The department said it is releasing 600,000 barrels to Total Petrochemicals USA Inc., bringing to 13.2 million barrels the amount loaned from the reserve since Katrina.
The department previously agreed to sell 11 million barrels of crude from the reserve.