Oil, Gasoline Rise, as Hurricane Ike Heads for Texas Refineries

By Mark Shenk

Sept. 12 (Bloomberg) -- Crude oil and gasoline rose as Hurricane Ike headed toward the Texas coast, home to 23 percent of U.S. refining capacity, shutting almost all Gulf of Mexico oil production as it passes.

About 19 percent of U.S. oil processing capacity has been shut before Ike makes landfall today. More than a quarter of U.S. crude production is based in the Gulf Coast region. Evacuations have halted 97 percent of Gulf oil output, the Minerals Management Service said yesterday.

``The big concern is about the products because the refineries aren't running,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``It remains to be seen how much damage will occur, but nobody wants to take chances.''

Crude oil for October delivery rose 63 cents, or 0.6 percent, to $101.50 a barrel at 9:01 a.m. on the New York Mercantile Exchange. Futures touched $100.10 yesterday, the lowest since April 2. Prices are up 27 percent from a year ago.

``Without Ike crude prices would be below $100,'' Bentz said.

Ike's eye was 230 miles (370 kilometers) southeast of Galveston, Texas, and moving west-northwest at 13 miles per hour, the National Hurricane Center said in an advisory at 7 a.m. Houston time today. The hurricane, which tripled in size in the Gulf of Mexico, was a Category 2 hurricane with sustained winds of 105 miles per hour.

Gasoline for October delivery rose 10.1 cents, or 3.7 percent, to $2.8498 a gallon in New York. Heating oil climbed 3.71 cents, or 1.3 percent, to $2.9526 a gallon.

Most offshore production platforms have been shut since Hurricane Gustav entered the Gulf last week.

`Critical Levels'

``The closures from Gustav and the looming closures from Ike are the focus of the market,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``We've seen big draws in gasoline stocks, and even though the driving season is over there are worries that supply will fall to critical levels.''

Brent crude oil for October settlement rose 93 cents, or 1 percent, to $98.57 a barrel on London's ICE Futures Europe. Prices touched $96.99 yesterday, the lowest since March 4.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.