Oil prices fall as refinery restarts
Analysts don't expect sharp decline in costs as output still lags
Energy futures retreated Monday after power was restored to a large refinery in Texas and the Bush administration said it was, in principle, prepared to tap an emergency supply of heating oil in the Northeast.
But analysts said they did not expect fuel prices to fall sharply anytime soon because of the persistent supply constraints caused by back-to-back hurricanes.
In the aftermath of Katrina and Rita, a dozen refineries along the Gulf Coast remain closed, crimping gasoline and heating-oil production, and oil and natural gas output is far below normal levels. Under the circumstances, brokers said the decline in energy futures on Monday should not be seen as the start of a significant downtrend and they warned it could be merely a pause in a broader uptrend.
“I think it’s more likely that this is probably a consolidation before the next move higher,” said broker Tom Bentz, of BNP Paribas Commodity Futures.
Light sweet crude for November delivery on the New York Mercantile Exchange fell 77 cents to $65.47 per barrel. Also on Nymex, heating oil futures fell by 4.87 cents to $2.0809 per gallon and gasoline futures fell 3.46 cents to $2.0622 a gallon.
November Brent futures slipped 59 cents to $62.89 per barrel on London’s International Petroleum Exchange.
An Exxon Mobil Corp. refinery in Beaumont, Texas, is a step closer to processing 348,500 barrels a day of oil after Entergy Corp. said Monday that over the weekend it restored one of two power lines to the plant.
That still leaves seven other refineries in Texas out of service in the aftermath of Rita, and four off-line in Louisiana and Mississippi as a result of Rita. Others are in the process of restarting but, combined, the losses add up to almost 3 million barrels a day of capacity, placing considerable strain on motor fuel supplies.
The average retail price of gasoline is $2.94 a gallon nationwide, or about $1 per gallon higher than a year ago, according to AAA.
But with the home-heating season just around the corner, the market received an ounce of relief when Energy Secretary Samuel Bodman said the government was “prepared to do what is necessary with strategic reserves,” in response to a question about the Northeast emergency heating oil supply.