Crude oil topped $70 a barrel, setting a new all-time high, as Hurricane Katrina wreaked havoc Monday (Aug. 29) and threatened production in the Gulf of Mexico.
According to CBS MarketWatch, crude prices eased off their peak levels to close just over $1 higher, on speculation of a possible release by President Bush from the Strategic Petroleum Reserve and reports that OPEC is considering a hike in production when it meets in September.
However, concerns about output in the region may outweigh any corrective strategies. “It is possible that Hurricane Katrina will impact the futures market like no storm ever has before,” said Phil Flynn, a senior analyst at Alaron Trading.
“If there was ever a time in the history of the world that we could ill afford to lose oil production, this is it,” he said.
U.S. oil refineries have been running all year at record rates to keep up with demand, he said, and “the potential loss of one or more refineries is really hard to even imagine.”
Crude for October delivery traded as high as $70.80 a barrel overnight and as high as $69.10 in early trading on the New York Mercantile Exchange. It closed up $1.07, or 1.6%, at $67.20 a barrel, below the record $67.49 close from Thursday.
Unleaded-gasoline futures for September delivery rose 13.37 cents, or 6.9%, to end at $2.06 a gallon, and September heating oil jumped 7.22 cents, or 3.9%, to close at $1.9088 a gallon. They tapped intraday highs of $2.16 and $1.975, respectively — both records on Nymex.
“This single storm could be the catalyst pushing crude oil into a more sustained period over $70,” Agbeli Ameko, a managing partner at First Enercast Financial, wrote in a Monday morning note to clients.
“This hurricane season is stacking up to be the worst in history for the energy markets,” he said.
Gulf of Mexico and onshore oil and natural-gas facilities had closed ahead of the storm, a threat to facilities at Port Fourchon, La., near New Orleans, which handles around one-sixth of U.S. oil supply, as well as rigs in the Gulf of Mexico.
“As the shut-ins persist, increasing winter-supply concerns, the potential for $80 per barrel crude and $15 per million BTU natural gas are realistic,” said Ameko.