Tropical Storm Edouard Strengthens on Path for Texas

By Brian K. Sullivan and Aaron Sheldrick

Aug. 5 (Bloomberg) -- Tropical Storm Edouard strengthened as it headed for Galveston, Texas, the biggest petroleum port in the U.S., prompting evacuations of some oil and gas rigs in the Gulf of Mexico.

The storm had maximum sustained winds of about 60 miles (97 kilometers) per hour at 1 a.m. Houston time, from 45 mph yesterday, the National Hurricane Center in Miami said in an advisory on its Web site. The system was 120 miles east of Galveston and moving west-northwest at 10 mph.

``Edouard is forecast to strengthen,'' the center's bulletin said. ``It is expected to be near hurricane strength by the time it reaches the coastline later today.''

Edouard may affect about 5.4 million residents of Texas and Louisiana, according to a Census Bureau report. Texas Governor Rick Perry yesterday issued a disaster declaration covering 17 counties and activated 1,200 National Guard personnel as a precaution. In neighboring Louisiana, Governor Bobby Jindal declared a state of emergency.

Crude oil fell to a three-month low as traders bet the storm would miss most offshore facilities. Six rigs and 23 production platforms were evacuated in the Gulf, according to the U.S. Interior Department.

Hurricanes Katrina and Rita, both of which reached Category 5 with wind speeds of more than 155 mph over the Gulf before hitting land as weaker storms, devastated New Orleans and the U.S. Gulf coast's oil output and refineries in 2005, roiling oil and natural-gas markets. Category 5 is the highest on the Saffir-Simpson scale of hurricane intensity.

Rigs Buffeted

To become a hurricane, Edouard must have maximum sustained winds of at least 74 mph. A hurricane watch remains in effect along the coast from Intracoastal City to Port O'Connor, meaning such conditions are possible within about 36 hours.

Some oil rigs south of the Louisiana coast were reporting gusts near hurricane strength during the past few hours, the hurricane center's advisory said.

Producers have idled 7.2 percent of natural-gas output and 0.87 percent of oil output in the Gulf because of the storm, the U.S. government said.

Marathon Oil Corp. said yesterday it is shutting its Texas City refinery. Marathon evacuated some non-essential workers from the Gulf, as did companies including Anadarko Petroleum Corp. and McMoRan Exploration Co.

The Louisiana Offshore Oil Port, the biggest U.S. oil import terminal, and the Houston Ship Channel, which serves the ports in Houston, Texas City and Galveston, shut down operations.

The Louisiana facility has the capacity to receive 1 million barrels of oil a day, or about 10 percent of U.S. imports.

The Gulf produced about 1.3 million barrels a day of crude oil and 7.7 billion cubic feet of natural gas a day in January, according to the Interior Department's Minerals Management Service.

Crude oil for September delivery fell as much as $1.41, or 1.2 percent, to $120 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $120.11 at 2:22 p.m. Singapore time. Yesterday, crude oil dropped $3.69 to settle at $121.41 a barrel in New York, the lowest close since May 5.

To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net; Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.