BUDAPEST, Hungary, AP – Crude-oil prices eased Tuesday after a robust rally a day earlier, but markets remained concerned over possible troubles with oil products as refinery damage by Hurricane Rita is still being assessed.
While Rita inflicted less damage than expected, all crude output in the Gulf of Mexico was still shut down and at least 16 refineries in Texas were closed after the storm blew through over the weekend, according to the U.S. Department of Energy.
"Products are a huge risk in the market at the moment and I wouldn”t be surprised to see those prices rally in the near future," said Sandra Ebner, energy analyst at Deka Bank in Frankfurt.
"With all the refinery problems in the U.S., everybody is seeking higher quality crude oil, which is easier to process, and this is keeping pressure on Nymex and Brent futures," she added.
Light sweet crude for November delivery fell 38 cents to $65.44 a barrel in electronic trading on the New York Mercantile Exchange. It had risen $1.63 to settle at $65.82 in New York on Monday after U.S. President George W. Bush said it was unclear how much oil production would be lost from Rita.
Heating oil, a main worry as the Northern Hemisphere winter approaches, was down over 2 cents to $2.0375 a gallon. Gasoline was trading at $2.1374 a gallon, up nearly a cent.
On London”s International Petroleum Exchange, November Brent futures fell 25 cents to $63.68 a barrel.
Saudi Arabia”s Oil Minister Ali Naimi said Tuesday that Hurricane Rita and Hurricane Katrina, which hit a month ago, had exposed the petroleum”s industry”s fragility.
"These are turbulent times for oil markets," said Naimi, but reiterated his country”s stance that there was enough spare crude to meet demand and that the problem instead was the lack of refineries, adding that environmental concerns had hampered new construction.
Environmental impact issues "make it more difficult to overcome these bottlenecks in the system," Naimi said, adding that current investment in refineries will bring new capacity on stream in three to five years.
Early estimates were that Hurricane Rita will cost U.S. refiners about 800,000 barrels a day in capacity, on top of a drop of about 900,000 barrels a day because of Hurricane Katrina. Market-watcher Energyintel put the number of lost barrels from Rita even higher.
"While Hurricane Rita did not deliver the knockout blow … (it) could result in the loss of 1.1 million barrels per day of capacity for up to a month," Energyintel said. "That seems sure to add huge new strains to already tight gasoline, jet fuel and heating oil markets."
The storm also knocked off-line 78 percent of natural gas output in the Gulf of Mexico, the U.S. Minerals Management Service said.
Oil companies were still assessing the damage at their refineries in the Houston area, the heart of U.S. petroleum production.
Valero Energy Corp.”s 255,000-barrel-a-day Port Arthur, Texas, facility remains down, but the company said it expected its Houston and Texas City refineries to be back to normal operations later in the week.
Exxon Mobil Corp. was studying damage at its refinery in Beaumont, Texas. The company owns the nation”s largest refinery, in the Houston area city of Baytown, and it did not appear seriously damaged.