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New York-Area Oil and Gas Prices Rise As Result of Rita

Posted on: Tuesday, 27 September 2005, 00:00 CDT

By James Bernstein, Newsday, Melville, N.Y.

Sep. 27--Despite less-than-expected damage to refineries in the Gulf of Mexico from Hurricane Rita, crude oil prices rose yesterday on speculation that a return to full production may take longer than anticipated.

At the pump, the average retail price for gasoline rose to $2.80 a gallon, according to the AAA motorists' group. On Long Island, the average price for regular gas was $2.985. In New York City, it was $3.036, AAA said.

Analysts, however, said they do not expect any sharp hikes in gas prices in the near term, and that prices might even fall as production steps up.

"Rita only gave the refineries a glancing blow," said Andrew Lebow, an oil trader at Man Financial Inc. in Manhattan. "But a glancing blow is a blow nonetheless."

Crude prices were down for a good part of the day, but rallied in the afternoon following the release of a report by the U.S. Minerals Management Service -- a federal agency that oversees oil production properties -- that said more than 1.5 million barrels of daily oil production in the Gulf of Mexico shut down as a result of Rita. The agency said that more than 78 percent of daily natural-gas production remains off line as well.

"Most everything is still shut in, and it's not going to be returning too fast," said Ron Gold, a vice president of the Manhattan-based Petroleum Industry Research Foundation, which studies energy economics. "That's got concerned."

Crude oil for November delivery closed up $1.63, or 2.5 percent, to $65.82 a barrel on the New York Mercantile Exchange. Prices are 33 percent higher than a year ago. Gasoline for October delivery closed up 4.36 cents, or 2.1 percent, to $2.1292 a gallon on the Nymex.

Home-heating oil prices are widely expected to rise this winter, analysts said.

"This market has been in such a big uptrend for two years now, it's hard for me to believe the big uptrend is over," said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures in Manhattan.

Analysts said investors became jittery yesterday after President George W. Bush said it was unknown how much damage was sustained to the refining areas directly hit by Rita. At least 29 percent of U.S. crude-oil refining capacity was shut because of hurricanes Katrina and Rita, federal energy officials have said.

But longer term, gasoline prices are expected to fall somewhat, said Phil Flynn, a trader at Alaron Trading Co. in Chicago. "They went up about a nickel," Flynn said. "You should get that nickel back, and [gas prices] could fall 10 to 15 cents" in the next few weeks.

The Oil Price Information Service, however, said that energy refineries damaged by Katrina now will take longer to be fully repaired. The safety supply net for the next several weeks is gone and even a minor disruption could cause a severe crunch, the service said.

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Copyright (c) 2005, Newsday, Melville, N.Y.

Distributed by Knight Ridder/Tribune Business News.

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BNP,

Source: Newsday, Melville, N.Y.

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