Oil Prices Slip As Gulf Production Restarts

WASHINGTON – Crude-oil prices declined Wednesday due to the steady return of post-hurricane petroleum production in the Gulf of Mexico, although lingering concerns about refinery outages in the region pushed gasoline futures slightly higher.

Light sweet crude for October delivery fell 46 cents to $65.50 a barrel in midday trade on the New York Mercantile Exchange, where gasoline futures climbed almost a penny to $2.062 per gallon.

On London’s International Petroleum Exchange, October Brent futures were down 30 cents to $64.37 a barrel.

Analysts said early signs that Hurricane Katrina’s damage to oil production facilities was not as bad as originally feared were partly behind lower crude prices.

Almost 900,000 barrels per day, or 58 percent, of Gulf of Mexico oil production remains offline, according to federal statistics. But a week ago, 95 percent of oil output had been shut down.

Also providing some relief to the oil market was a pledge last week from more than 20 nations under the International Energy Agency to release the equivalent of 2 million barrels per day of crude and refined products. More than 680,000 barrels per day of that total will consist of gasoline and diesel, the IEA said Wednesday.

However, the amount of crude oil processed into gasoline, diesel and other fuels by Gulf Coast refineries could be reduced by close to 1 million barrels per day for at least several weeks because of hurricane-related power outages and water damage, according to the preliminary damage assessments.

The four refineries believed to be most negatively affected by Katrina are:

– Chevron Corp.’s 325,000 barrels per day plant in Pascagoula, Miss.

– ConocoPhillips’ 247,000 barrels per day plant in Belle Chasse, La.

– ExxonMobil Corp.’s 187,000 barrels per day plant in Chalmette, La.

– Murphy Oil Corp.’s 120,000 barrels per day plant in Meraux, La.

Another segment of the Gulf’s energy infrastructure that may have sustained longer-term damage is the web of underwater pipelines critical to the gathering and transportation of natural gas. Three natural gas processing plants owned by Enterprise Products Partners LP are not yet operational and, depending on the extent of damage, could be out for weeks.

“The longer term impact of Katrina may be felt much more intensely in North American natural gas markets, which like refining have displayed a new dimension of vulnerability,” said Energyintel analyst Tom Wallin in a research note from New York.

More than 4 billion cubic feet a day, or 42 percent, of the region’s natural gas production remained shut down as of Tuesday, according to the federal Minerals Management Service.

Still, that is a big improvement from a week ago, when almost 88 percent of daily natural gas output was offline and natural gas futures fell by almost 50 cents Wednesday to $11.16 per 1,000 cubic feet. A year ago, natural gas futures traded below $5.

Since Aug. 26, 67.6 billion cubic feet of output have been lost, while 12.7 million barrels of crude have been lost.

Nymex oil futures are more than $5 off their intraday high of $70.85 reached Aug. 30 in the wake of Katrina, but prices are about 50 percent higher than a year ago.

On Tuesday, the Energy Department said the average retail price of regular unleaded climbed by 46 cents last week to $3.07 per gallon. That’s a nominal record, but still 4 cents below the inflation-adjusted high reached 25 years ago, according to agency statistics.

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Associated Press Writers George Jahn in Vienna, Austria and En-Lai Yeoh contributed to this report from Singapore.