Crude Oil Prices Surge On Katrina
Crude oil futures on the New York Mercantile Exchange were trading more than $2/barrel higher at more than $68 on Monday morning after briefly surging past $70/barrel in overnight trade as powerful Hurricane Katrina disrupted production in the Gulf of Mexico.
The NYMEX October Crude oil contract finished the overnight electronic session up $3.01 at $69.14 a barrel after setting a record high at $70.80.
Hurricane Katrina slammed into the Louisiana coast on Monday, making landfall just east of New Orleans with sustained winds of 140 mph.
While the storm has weakened somewhat from Sunday when it was in the open Gulf packing 175 mph winds, it is still a very powerful Category 4 hurricane on the five-level Saffir-Simpson Scale.
An estimated 633,000 barrels per day of crude production, or 42% of U.S. output in the Gulf of Mexico was reported shut down due to the hurricane, with the total expected to rise significantly as more operators report to the U.S. government on Monday.
Also, at least eight refineries with a combined daily refining capacity of 1.774 million barrels of crude oil had shut down ahead of Katrina, operators said. Gulf Coast refiners produce about 45% of U.S. gasoline. The Louisiana Offshore Oil Port halted all operations.
Experts say that Katrina has potential to do serious long-term damage to Gulf oil production. However, the full extent of the damage and how long it will affect supplies will only be known after the storm clears. Last year Hurricane Ivan disrupted output for months.
Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.
To see more market perspectives, visit Brock's Web site at www.brockreport.com.