NEW YORK - Oil fell on Thursday as Hurricane Rita weakened slightly after helping to cut crude demand in the United States, the world's largest consumer, by nearly 30 per cent.
Oil companies shut 12 refineries in Texas and one in Louisiana as a precaution against the storm.
"Bottom line,
refinery demand simply isn't there," said Jim Ritterbusch, President of Ritterbusch and Associates in Illinois. Even though refineries shut, major flooding damage, like that caused by Katrina, was unlikely, he said.
US light crude settled 30 cents weaker at US$66.50 a below a three-week high of US$68.27 hit on Wednesday.
London Brent crude fell 23 cents at US$64.50.
Rita slipped to a Category 4 storm on Thursday with winds of 150 miles per hour (240 kph), which helped push down prices, but remained an extremely dangerous storm. It aimed at Texas somewhere between Houston and the Louisiana border and was expected to hit land by early Saturday.
Rita churned through the Gulf of Mexico less than a month after Hurricane Katrina slashed offshore oil and gas platforms and flooded the Louisiana refining hub, sending prices to a record US$70.85 a barrel.
Four refineries, representing 5 per cent of the total 30 per cent of US downed refining, were still out after that storm. And Rita has added to shut-in offshore production, with more than 91 per cent of output shut, the Minerals Management Service said.
Analysts predicted the biggest impact would be on petrol prices, as lost refining capacity aggravates a shortage.
"Certainly for product prices, the only way is up," said Mark Keenan of London-based fund MPC.
Avert shortage
US crude supplies are nearly 12 per cent above last year's levels, after the Organisation of the Petroleum Exporting Countries this summer sent oil to the world's biggest consumer to avert a shortage in the fourth quarter.
Analysts warned any damage to natural gas facilities could also have a very bullish impact because lost supplies would be far more difficult to replace than lost crude.
"The physical implications are potentially quite significant, particularly for heating oil, heading into winter in the United States, and natural gas," said Matthew Schwab, managing director of AIG Financial Products Corp.
For now, petrol futures were showing the sharpest gains among refined products.
Petrol futures rose 8.4 cents to nearly US$2.14 a gallon. Heating oil settled nearly a cent higher to about US$2.05 a gallon.
About 28 million of the total US oil refining capacity of 17.1 million barrels per day is now shut as a precaution against Rita and continued closures following Katrina.
Unrest in oil producing countries was also supporting prices.
The arrest of a Nigerian warlord over "treasonable" comments this week brought his supporters to the streets, threatening violence and putting supplies from the world's eighth largest exporter of crude at risk.
More than 100 armed militants invaded a Nigerian oil flow station operated by US-based Chevron on Thursday, disarming security forces and forcing it to stop production.
Oil major Shell evacuated staff from its headquarters as a precaution in a region that accounts for most of Nigeria's 2.4 million barrels per day oil output.
Analysts were also concerned about the upsurge of violence in Iraq and unease over Iran's secretive nuclear programme.
- REUTERS
NEW YORK - Oil fell on Thursday as Hurricane Rita weakened slightly after helping to cut crude demand in the United States, the world's largest consumer, by nearly 30 per cent.
Oil companies shut 12 refineries in Texas and one in Louisiana as a precaution against the storm.
"Bottom line,
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