Gasoline prices rise due to Katrina

Associated Press

NEW YORK - Gasoline futures rose yesterday amid expectations that today's weekly snapshot of U.S. inventory data will show gasoline supplies at near critical levels, largely because of a shortage of production in the Gulf Coast caused by Hurricane Katrina. Crude futures fell after a volatile session.

Analysts believe the current inventory loss will only have short-term effects on the U.S. economy, however.

"After the report [today], demand will come back with a vengeance," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Gasoline futures rose almost 2 cents to $1.8916 a gallon, and heating oil gained about 3 cents to $1.8402 a gallon on the New York Mercantile Exchange. The average retail price of unleaded gasoline was about $2.96, a cent lower than the day before.

Light, sweet crude for October delivery on the New York exchange shed 23 cents to settle at $63.11 a barrel after seesawing throughout the session. On Monday, the contract lost 74 cents.

October Brent crude oil futures fell 19 cents to settle at $61.61 a barrel on London's International Petroleum Exchange.

Traders also expressed concerns about natural gas supplies as the nation heads into the cooler months of the year.

The country is severely limited in its ability to import natural gas, Flynn said.

"[Federal Reserve Chairman Alan] Greenspan warned about this years ago," he said. "We're going to have to rely on Canada and Mexico, and the problem is not going away."

Senior Bush administration officials touring the Gulf Coast area devastated by Katrina expressed concern yesterday about possible shortages of natural gas, saying the region's production may not recover for months.

Last week, a U.S. Energy Department report predicted a 100,000 barrel per day increase in U.S. petroleum demand this year, down from 160,000 barrels per day a month earlier. This was "largely due to sharply higher prices," the department said.

But ahead of today's release of the latest U.S. inventory figures, Vienna's PVM Oil Associates said that gasoline supplies could slump to a "critically low level" of nearly 185 million barrels - the industry minimum.

Analysts predicted that today's release will report a 3 million to 6 million barrel drop in gasoline inventory because of the continued refinery outage and a drop in demand because of high prices.

A 5 million to 7 million barrel drop is expected in crude oil, largely because of shipping delays at Gulf Coast ports, said Edward A. Silliere, vice president of risk management at Energy Merchant LLC in New York. He predicted that the inventory report will show a 1 million to 2 million barrel drop in heating oil because of the cutback in refining production.

The crude oil price on the New York Mercantile Exchange has dropped from its intra-day high of $70.85, reached Aug. 30 after Katrina hit, but still is more than 40 percent higher than levels a year ago.

Prices had been falling earlier on expectations that shipments of petroleum products from International Energy Agency countries to the United States would ease shortages. The agency is releasing 60 million barrels of petroleum to the United States to help replace supplies lost to Katrina.

U.S. refiners also will know by the end of the week how much crude they can get from the U.S. Strategic Petroleum Reserve. Up to 30 million barrels of crude will be sold over a month.

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