Oil Rises a Fourth Day as Gustav Threatens U.S. Gulf Platforms

By Christian Schmollinger

Aug. 28 (Bloomberg) -- Crude oil rose for a fourth day in New York as meteorologists forecast Tropical Storm Gustav will be the most damaging since Hurricane Katrina as it moves toward production platforms in the Gulf of Mexico.

Gustav may reach the coast of Louisiana, where U.S. oil and gas offshore platforms and pipelines are most concentrated, by 8 p.m. on Sept. 1, the National Hurricane Center said at 2 a.m. Miami time. The storm may become a ``hurricane rivaling Rita and Katrina,'' whose disruption caused record prices, Joe Bastardi of AccuWeather.com said yesterday.

``The worst-case scenario is that it develops into a hurricane as it moves into the Gulf and hits oil infrastructure or refinery infrastructure,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney.

Crude oil for October delivery rose as much as $1.10, or 0.9 percent, to $119.25 a barrel on the New York Mercantile Exchange, and traded at $118.60 at 2:38 p.m. Singapore time. Prices, 66 percent higher than a year ago, have dropped 19 percent from a record $147.27 a barrel on July 11. Yesterday, oil rose $1.88, or 1.6 percent, to $118.15.

Gustav was packing sustained winds of about 45 miles (75 kilometers) an hour, the National Hurricane Center said. The storm was about 105 miles south-southwest of Guantanamo, Cuba, and moving west-southwest at 8 mph. It is expected to turn west- northwest tomorrow and regain hurricane strength over the next 48 hours.

Shell Evacuates

``If heading into the weekend it looks like it could strike some of the more critical areas, the market will build in a fear premium,'' said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. ``All eyes are on how it progresses.''

Royal Dutch Shell Plc, Europe's biggest oil company, said it has evacuated about 400 workers from its oil and natural-gas platforms in the Gulf of Mexico because of Tropical Storm Gustav.

The company will move another 270 workers today and plans to evacuate the remaining 600 on Aug. 29 and Aug. 30, Robin Lebovitz, a Shell spokeswoman, said in an e-mailed statement.

Energy producers planned to evacuate ``several thousand'' employees from offshore rigs yesterday because of the storm, said Ted Falgout, the director of Louisiana's Port Fourchon. Almost 20,000 workers are on offshore platforms, about one-quarter of which are needed to maintain output, Falgout said in an interview yesterday.

Gulf Production

``Most companies are waiting until Friday to decide whether they need to shut down production,'' Falgout said. ``If you look at models showing the storm's track, it should scare you.''

The Gulf accounts for about 14 percent of U.S. gas output. The coast along Louisiana and Texas is home to 42 percent of U.S. refining capacity.

In August and September 2005, U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita struck the Gulf Coast. Katrina closed 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the storms.

Prices also rose today after a government report showed that U.S. gasoline supplies dropped for a fifth week. Gasoline stockpiles fell 1.18 million barrels to 195.4 million barrels, the Energy Department said in its weekly report. A drop of 2.45 million barrels was expected, according to the median of 12 analyst responses in a Bloomberg News survey.

Crude-oil inventories dropped 177,000 barrels to 305.8 million barrels, the report showed. Expectations were for a gain of 1.1 million barrels. Imports fell 9.2 percent to 9.9 million barrels a day.

Supplies of distillate fuel, a category that includes heating oil and diesel, climbed 57,000 barrels to 132.1 million barrels.

Brent crude oil for October settlement rose as much as 98 cents, or 0.8 percent, to $117.20 a barrel on London's ICE Futures Europe exchange. The contract was at $116.73 at 2:39 p.m. Singapore time.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.