Hurricane Katrina Pushes Oil Futures Over $70 a Barrel

By Freddie Mooche

New York - Oil futures climbed over $70 a barrel on the New York Mercantile Exchange Monday over production and supply concerns as Hurricane Katrina wreaked havoc across Gulf coast states.

The new price was an all-time high for oil futures as estimates of refinery production were down as much as 1 million barrels per day due to the hurricane.

The category 4 storm advanced on an area crucial to the U.S. energy infrastructure as trading opened in New York. Many oil platforms in the Gulf were right in the path of Hurricane Katrina as well as refineries, pipelines and import terminals in Louisiana and Mississippi.

Oil companies evacuated workers and shut down more than 600,000 barrels of daily production in the Gulf alone.

Light, sweet crude for October delivery climbed $4.67 a barrel to hit a high of $70.80 a barrel in the New York, before declining to $69.71 in late afternoon trading in Europe. Oil still managed to close up $3.58 from Friday's closing price in New York.

But gasoline prices really soared, climbing 20 cents a gallon, for a one-day record of 12 percent. Gasoline futures closed at $2.1275 a gallon in New York. While heating oil was up 12 cents at $1.9587 a gallon.

Market pressures were heavier than normal on the NYMEX due to the lack of Brent crude futures trading on the London International Petroleum Exchange Monday due to a bank holiday.

The futures market's reaction to the category 4 storm was not unwarranted experts said, pointing to US government statistics that show Gulf of Mexico domestic production averaging 1.5 million barrels of oil per day, which accounts for 25% of domestic output.

On Friday oil futures had closed down at $66.13 a barrel when traders thought hurricane Katrina would fizzle out over Florida. Though the category 4 storm regained its strength as in entered the Gulf of Mexico over the weekend.

Analysts are pondering whether President Bush will release US strategic oil reserves in light of the disruption to domestic production. But Bush has said in the past that he would only approve releasing oil from the US strategic reserve if foreign delivery were interrupted.

President Bush was flying to California Monday to speaks about Medicare reform and has made no comment to the press regarding the US strategic oil reserve.

Energy traders believe that crude oil prices could continue to rise if supply-side issues are not dealt with by the Bush administration.