Oil prices slip as hurricane Rita weakens
(AP)
Updated: 2005-09-23 20:36

Crude oil prices fell Friday for a second consecutive day and gasoline futures prices slipped as traders gauged news that Hurricane Rita had weakened, implying that damaged to refinery capacity in the Gulf could be less severe than originally feared.

With Texas refineries being above sea level, unlike many around New Orleans that were disabled by last month's Hurricane Katrina, there's less potential for flood damage.

Light sweet crude for November delivery on the New York Mercantile Exchange slipped 80 cents to $65.70 a barrel by midday in Europe. Heating oil dropped 5 cents to $1.9950 a gallon while gasoline fell 7 cents to $2.0680 a gallon.

Brent crude oil futures for November fell 88 cents to $63.72 a barrel on London's International Petroleum Exchange.

Nymex crude oil prices are more than 40 percent higher than a year ago, though still below the intraday record of $70.85 set Aug. 30 when Katrina struck Louisiana, damaging numerous refineries and platforms and shutting down production.

"Last week's bearish and pessimistic mood was overdone, considering that almost 900,000 barrels per day of U.S. refining capacity was still down (pre-Rita), and that global product demand is forecast to increase by 3.5 million barrels per day between September and December," Michael Wittner, Global Head of Research at Calyon Financial in London, told Dow Jones Newswires.

While forecasters said the storm could slow further by the time it reaches land, analysts also say lesser winds still pose a serious threat to oil rigs and refineries. Worries remain about a direct hit on the Texas coastline, home to more than a quarter of U.S. refining capacity.

As Rita plowed through the Gulf of Mexico, eleven of Texas' 26 refineries, with a combined daily capacity of 4 million barrels, have been shut, Dow Jones said.

On Thursday, the U.S. Minerals Management Service said 605 platforms in the Gulf were unstaffed, up from 469 on Wednesday. More than 90 percent of the region's oil production was blocked, while more than 65 percent of natural gas production was affected.

Also Thursday, Saudi Arabia's foreign minister said in an interview with The Associated Press in Washington that he would like to see the price of crude fall by about $20 a barrel below what it is now.

Prince Saud al-Faisal said there is no shortage of oil, and that prices should stabilize at $40 to $45 a barrel.

Saud said a big problem with energy markets is a lack of refineries in the United States and elsewhere. He noted that Saudi Arabia had sought to help build a refinery in the United States with no takers. It is building two refineries in Saudi Arabia, he said.

"We are adding barrels of oil on the market," Saud said. "It has no place to go."

Tight supply with little excess production capacity and unabating demand, especially in China are the two major forces shaping the global oil market.