Crude oil rose a second day in New York after a report showed Hurricane Katrina caused a larger-than- expected decline in U.S. inventories.
Stockpiles fell 6.6 million barrels last week, the Energy department said yesterday, three-times the drop forecast in a Bloomberg survey of analysts. More than half of U.S. Gulf oil output remains shut after last month's storm damaged platforms in an area accounting for 30 percent of U.S. production.
“There's just been too much disruption to too many parts of the whole supply chain,” David Thurtell, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney said in an interview. “There's a worry that it's going to take longer to get things back.”
Crude oil for October delivery rose as much as 32 cents, or 0.5 percent, to $65.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $65.31 at 11:07 a.m. in Singapore. Oil is 50 percent higher than a year ago.
Yesterday, the contract rose $1.98, or 3.1 percent, to $65.09, the highest closing price since Sept. 6. Gains accelerated in the last 45 minutes of trading after a U.S. Minerals Management Service report showed Gulf producers have restored less than 54,000 barrels of daily output this week.
Output in the Gulf was 56 percent below normal yesterday, barely changed from the day before, a government report showed. Katrina has halted a total of 20.5 million barrels of oil output since the hurricane entered the Gulf on Aug. 26.
Oil futures have declined 8 percent since touching a record $70.85 a barrel on Aug. 30, reports Bloomberg.
But dealers said the data also revealed a decline in U.S. gasoline demand that might portend a scaling back by U.S. drivers at the pump after the Aug. 29 hurricane pushed U.S. retail gasoline to $3 a gallon.
"Gasoline consumption fell. That suggests one of two things. First is the economy in worse shape than we thought or the high oil prices are starting to be affected by demand destruction," said Bill O'Grady, director of futures research at A.G. Edwards in St. Louis.
Evidence of waning global fuel demand growth has helped drag crude down from its $70.85 record a fortnight ago.
"The demand side of the oil equation is weakening, with the U.S. standing as the last bastion of growth," said a report by Credit Suisse First Boston.
Traders are calculating the impact of the likely closure for months of at least three U.S. Gulf refineries after Katrina against the emergency release of oil by the International Energy Agency.
The U.S. Environmental Protection Agency continued its relaxation of some clean air requirements, hoping to lessen the chance of fuel shortages after Hurricane Katrina. The EPA on Wednesday said gasoline that evaporates faster than normal can be sold in California through Oct. 31, in eastern Texas through Oct. 1 and in Phoenix, Arizona through Sept. 30.