The post-Hurricane Katrina petroleum-supply outlook improved somewhat on Friday as U.S. and European governments agreed to release 2 million barrels a day of oil and refined products from their reserves.
The announcement by the International Energy Agency was made after energy markets had closed, but prices fell on reports that it was coming. Light sweet crude for October delivery fell $1.90 to settle at $67.57 a barrel on the New York Mercantile Exchange. Gasoline futures tumbled nearly 23 cents to settle at $2.18 a gallon, their first decline this week.
The IEA agreement will put more than 60 million barrels of oil equivalent on the market over the next month, with the U.S. government portion amounting to 30 million barrels of crude oil from its strategic reserve.
The market was particularly upbeat about the announcement from the 26-nation IEA because it will bring gasoline and diesel from Europe to the U.S. market, which is experiencing tightening supplies of motor fuel due to Katrina-related refinery and pipeline troubles.
The IEA announcement ''has definitely relieved some of the pressure,'' said oil broker Tom Bentz of BNP Paribas Futures. ''But the problem is, it's going to take time to get here.''
It takes close to two weeks for a typical tanker of fuel to be delivered from Europe to the United States when the time needed to load, travel and unload is factored in. Not surprisingly, tanker rates soared on Friday, with prices for a trans-Atlantic trip running as high as $40,000 a day, or more than twice the rate a week ago, analysts said.
Another bright spot on Friday was the increasing levels of fuel being delivered from the Gulf Coast by the Colonial and Plantation pipelines, which carry gasoline and diesel to East Coast markets. The return of the Capline pipeline, which brings crude oil from the Gulf Coast to Midwest refiners, was also a positive development, analysts said.
''We've had some good signs, we'll just keep working at it,'' said John Felmy, chief economist of the American Petroleum Institute, a Washington-based trade group.
Still, U.S. energy market jitters persisted at above-normal levels.
Gulf Coast refineries and natural gas processing plants remained out of service due power outages and it is still not entirely known how much damage was sustained to underwater pipelines in the Gulf of Mexico that carry oil and natural gas to onshore facilities.
''A prolonged outage raises concerns about the adequacy of supply for winter,'' said Bob Ineson, a natural gas analyst at Cambridge Energy Research Associates in Houston.
More immediately, a small percentage of gas stations are dealing with shortages, often temporary, as motorists top off tanks and deliveries are delayed.
Even with pipelines that distribute oil and gas from the Gulf Coast pumping again - and U.S. and European nations tapping their inventories - the immediately available supply of fuel for automobiles, homes and airlines in East Coast and Midwest markets is tightening, analysts said. Some 1.8 million barrels a day of refining capacity remains shut down.
As the owner of 50 gasoline stations across southeastern Virginia, Jeff Miller said he is facing a serious challenge headed into the Labor Day weekend: making sure each one has fuel, at all times.
''Every morning, I'm sitting down, figuring out which stations have product and which don't, then dropping off loads to keep at least some gas at all of them,'' Miller said. But as of Friday, four of his stations were dry and demand was holding steady at the others despite prices averaging $3.10 a gallon.
The Gulf Coast is responsible for around 30 percent of U.S. crude production and quarter of its gas. A large portion of U.S. oil imports also arrive at Gulf Coast ports.
The U.S. federal Minerals Management Service said the percentage of oil offline in the Gulf of Mexico was around 90 percent of total output while gas around 79 percent of total daily production. Total lost oil output since Aug. 26 was 7.44 million barrels.
Hurricane Katrina damaged or displaced an estimated 58 Gulf of Mexico oil platforms and drilling rigs, according to the American Petroleum Institute. Among those, 30 rigs and platforms have been reported lost.
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