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Mexico Exporting Oil After Emily Ports in Operation, Workers Return to Gulf Rigs As Hurricane Passes

Posted on: Thursday, 21 July 2005, 18:00 CDT

MEXICO CITY - Oil workers began returning to rigs in the southern Gulf of Mexico, and the Mexican state oil monopoly opened its three main loading ports Wednesday, as Hurricane Emily chugged slowly inland and weakened.

Meanwhile, nearly 6 percent of daily U.S. oil production on the Gulf remained suspended because of Emily on Wednesday.

Early in the day, crude futures prices moved higher on concerns about production disruptions from Hurricane Emily and after a U.S. warning of possible terrorist attacks in Saudi Arabia.

Oil prices then fell below $57 a barrel after new government data showed rising U.S. supplies of diesel and heating oil and only a smaller-than-expected decline in crude oil inventories.

Light sweet crude settled 74 cents lower at $56.72 a barrel on the New York Mercantile Exchange. September futures, which become the front-month contract beginning today, slid 67 cents to $58.02 a barrel.

Heating oil futures fell by 3.24 cents to $1.5977 a gallon, while gasoline dropped by less than a penny to $1.676 a gallon.

In its weekly supply snapshot, the Department of Energy said stocks of distillate fuel, which include heating oil, diesel and jet fuel, grew by 2.3 million barrels to 122.7 million barrels, or 5 percent above year-ago levels.

The nation's inventory of crude oil slipped by 900,000 barrels to 320.1 million barrels, or 7 percent above year-ago levels, the agency said. Analysts said traders were expecting a decline of at least twice that size.

"It really was a bearish surprise to the market," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Flynn said that while the damage to oil production from Hurricane Emily appears to be temporary, the market will remain on edge until a clearer picture develops - and any time a big storm moves through the Gulf of Mexico. While he believes oil prices could theoretically head down toward $50 a barrel this summer, assuming no major supply snags, he maintains that traders will become jittery as the winter heating season approaches.

Tankers carrying about 2 million barrels of Mexican oil left ports belonging to Petroleos Mexicanos, or Pemex, on Wednesday in the southern Gulf, though Mexican production remained at a standstill in the northern Gulf as the hurricane came ashore before dawn about 75 miles south of the U.S.-Mexico border.

Pemex sends at least 80 percent of its 1.8 million barrels per day in crude exports to the United States.

About 16,000 oil workers had abandoned Mexican offshore installations in the hurricane's path, including all workers from offshore installations in the Poza Rica-Altamira area, near Emily's second landfall in Mexico.

Although the storm missed the United States, there were precautionary rig evacuations on the U.S. side of the Gulf.

The cumulative lost oil production from U.S. waters on the Gulf reached 215,478 barrels. Cumulative natural gas production losses were 1.4 billion cubic feet.

The storm passed more than 100 miles north of Pemex's main production areas on the Bay of Campeche, where all personnel were expected back on Friday.

Pemex was surveying its facilities in the Gulf for damages on Wednesday and had not reported any losses.

Mexico's three main oil loading ports in the Gulf - Dos Bocas, Pajaritos and the offshore terminal at Cayo Arcas - all were open Wednesday.

The hurricane had forced Pemex to suspend daily production of 2.95 million barrels of oil. The company did not report how much production had been restored on Wednesday.

Source: Advocate; Baton Rouge, La.

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