Oil Prices Dip Despite Hurricane Concerns ; OPEC Agrees to Sell 2 Million More Barrels

Crude-oil prices fell more than $1 a barrel today as traders watched the progress of Hurricane Rita but worried it could inflict further damage to an industry still reeling from Hurricane Katrina’s onslaught three weeks ago.

Oil prices jumped more than $4 a barrel Monday — the biggest one- day price jump ever — but fell back today. Light, sweet crude for October delivery was trading at $65 a barrel on the New York Mercantile Exchange, down $2.39. The October contract expires at the end of the trading day today.

Prices are more than 45 percent higher than a year ago, but off the all-time high of $70.85 a barrel reached Aug. 30 when Katrina made landfall.

Natural gas reached a high of $12.865 per 1,000 cubic feet Tuesday, before retreating to $12.238. Heating oil fell more than 6 cents to $1.9735 a gallon while gasoline dropped 9 cents to $1.9500 a gallon.

On London’s International Petroleum Exchange, November Brent crude oil futures fell $1.09 to $64.52 a barrel.

In Vienna, the Organization of Petroleum Exporting Countries agreed today to make available 2 million extra barrels of oil a day in an effort to reassure markets edgy over supplies for the winter and storms threatening refineries along the U.S. Gulf Coast.

But that decision took a back seat to Hurricane Rita, which was upgraded from a tropical storm this morning.

“OPEC does not have any impact to lower prices,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. “They don’t

have light, sweet crude — only heavy, sour crude which is harder to make into petroleum products.”

“Everyone’s just looking at Rita. It’s more psychological right now,” said Emori. “But if Rita comes to the Gulf of Mexico and disrupts supply, then we have a problem.”

Demand for products like heating oil and diesel traditionally rises during winter.

“It is difficult to see any changes on the supply side that would bring the present period of high prices to an end in the short term,” the London-based Center for Global Energy Studies said. “OPEC’s spare capacity has dropped to 2 million barrels per day, but much of that outside of Saudi Arabia remains of questionable usefulness.”

Forecasters at the U.S. National Hurricane Center said today that Rita had developed into a Category 1 hurricane with sustained winds of 75 mph. The storm, sweeping across the Florida Keys, could gain more strength as it crosses the Gulf of Mexico.

Chevron Corp., Shell Oil and BP PLC said they were evacuating workers on oil facilities in the Gulf of Mexico.

“These storms are pretty big and broad sometimes, so you take no chances,” said Chevron spokesman Mickey Driver. “This is standard operating procedure when storms like Rita appear.”

The U.S. Minerals Management Service said more than 800,000 barrels of daily output cannot be produced because of Katrina, amounting to more than 55 percent of daily production in the Gulf of Mexico . Some 83 platforms and five rigs are left unstaffed from Katrina and Rita, the MMS said.

Many questioned the impact OPEC’s additional crude would have on the prices.

Claude Mandil, head of the International Energy Agency, questioned OPEC’s ability to live up to its offer of an extra 2 million barrels a day.

“OPEC will be able to make more crude available, but it would be less than 2 million, somewhere between 1 and 1.5 million barrels per day,” he said.

Nigerian Oil Minister Edmund Daukoru said he considered it unlikely that the 2 million barrels a day would be needed, though he conceded that Rita’s potential impact was difficult to judge.

“It’s tough to blame (OPEC) for higher oil prices. I think they’re doing what they can,” said Jason Schenker, an economist with Charlotte, N.C.-based Wachovia Corp., the fourth-largest U.S. bank.

Mandil said the IEA may extend its release of emergency oil and fuel stocks if Rita hits already damaged U.S. Gulf Coast oil installations. He described the OPEC measures as “very limited” gestures.

The primary and immediate concern is Hurricane Rita.

“We really can’t afford to lose more production,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

“The market is much more focused on Rita,” Flynn said. “OPEC is kind of secondary concern to the market.”