Oil Falls Below $100 as Refineries Escape Major Storm Damage

By Jane Lee

Sept. 15 (Bloomberg) -- Crude oil fell below $100 a barrel to the lowest in six months as refineries along the Gulf of Mexico coast escaped major damage from Hurricane Ike.

More than 20 percent of U.S. oil refining capacity was shut, limiting fuel deliveries and prompting the Department of Energy to release 309,000 barrels from its emergency stockpiles. Refiners reported no major damage after Ike struck the Houston area, and said preparations are under way to restart plants.

``Ike came and no serious damage has been done to the infrastructures,'' said Victor Shum, a senior principal with consultants Purvin & Gertz Inc. in Singapore. ``The general market sentiment is decidedly bearish because of slowing oil demand'' in developed countries, he said.

Crude oil for October delivery fell as much as $2.72, or 2.7 percent, to $98.46 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the lowest since Feb. 26. The contract was at $98.66 at 4:03 p.m. in Singapore. Prices are up 22 percent from a year ago.

Gasoline for October delivery fell as much as 14.71 cents, or 5.3 percent, to $2.6225 a gallon in New York. The contract was at $2.6539 at 4:03 p.m. in Singapore. New York Mercantile Exchange electronic trading opened early yesterday to allow traders to respond to Ike.

Oil also fell on concern that the U.S. economy is slowing, reducing demand for fuels. The concern was heightened by Lehman Brothers Holdings Inc.'s preparation to file for bankruptcy after potential buyers abandoned talks to buy the U.S. securities firm.

Lehman Talks

Crude has declined 33 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduce energy demand.

Barclays Plc, the U.K.'s third-biggest bank, and Bank of America Corp. pulled out of discussions to buy Lehman Brothers as the U.S. government raced to find a solution for the faltering investment bank. Lehman, once the fourth-largest U.S. investment bank, plans to file a Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of New York, the firm said in a statement today.

A total of 14 Texas and Louisiana refineries, with combined crude processing capacity of 3.57 million barrels a day, are shut because of Ike.

Gulf Refineries

Brent crude oil for October settlement fell as much as $2.28, or 2.3 percent, to $95.30 a barrel on London's ICE Futures Europe. It was trading at $95.38 a barrel at 4:05 p.m. in Singapore. Prices have tumbled 13 straight days, declining 18 percent.

Valero Energy Corp., the largest U.S. refiner, said it found ``no significant structural damage'' at three Houston-area refineries shut before the storm.

Power has been restored to ``most production units'' at Valero's Houston refinery and the company is working to restore power to its Texas City and Port Arthur plants. All three refineries are working on ``startup plans,'' Bill Day, a company spokesman, said in a telephone interview yesterday.

Exxon Mobil Corp. said its Baytown refinery, the largest in the U.S., has power and damage appears ``limited,'' while it is checking its Beaumont, Texas, plant, which is without power.

Royal Dutch Shell Plc said it has found some ``moderate'' damage to offshore oil installations following Hurricane Ike and no major structural damage to any platforms or drilling rigs.

Assessing Plants

ConocoPhillips said its Sweeny, Texas refinery has power and its condition is being assessed. LyondellBasell Industries' Houston refinery will be down for at ``least several days,'' said David Harpole, a company spokesman. Marathon Oil Corp. and Motiva Enterprises LLC said they were evaluating their plants.

Colonial Pipeline Co. said yesterday it restored operations to its gasoline and distillate pipelines, which run from the Gulf Coast to the Northeast.

The oil price declined as investors were relieved that Ike didn't cause much damage to facilities, Jonathan Barratt, managing director of Commodity Broking Services Ltd. in Sydney, said in a Bloomberg Television interview.

``We're still going to make up all those lost inventories,'' he said. ``This is a relief selloff.''

Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended Sept. 9, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 6,336 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 7,995 contracts, or 56 percent, from a week earlier.

To contact the reporter on this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.net