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Rita hits oil refineries with glancing blow

Early estimates are that the hurricane will cost U.S. refiners about 800,000 barrels a day in oil refining capacity.

DALLAS - Oil companies said Monday that damage to their massive Texas refineries from Hurricane Rita appeared lighter than expected, but analysts are still predicting that retail gasoline prices may remain near $3 a gallon for weeks or even months.

That's a consequence of tight supplies and the fact that it may take weeks to restart all the closed refineries in Texas, Louisiana and Mississippi - more than a dozen in all. Combined with reports of Rita-related damage to rigs in the Gulf of Mexico, the idle refineries raised fears about shortfalls of heating oil and natural gas, fuels homeowners will use to warm their homes this winter.

That uncertainty was evident on energy markets Monday as crude oil futures rose more than $1 a barrel and gasoline and natural gas futures also climbed.

Light, sweet crude rose $1.63 to settle at $65.82 on the New York Mercantile Exchange, after dropping to $62.65 earlier in the day.

Gasoline futures rose more than 4 cents to $2.1292 a gallon, after falling as low as $1.94. Heating oil rose nearly 11 cents to $2.0586 a gallon. Natural gas rose nearly 12 cents to $12.44 per million British thermal units.

"We didn't dodge a bullet with Rita, we took a couple bullets in the legs with Katrina and Rita," said Tom Kloza, an analyst with the Oil Price Information Service of Wall, N.J. "It's still a significant loss, and it's going to create some supply problems through at least mid October."

President Bush said Monday that the government is prepared again to tap the Strategic Petroleum Reserve to ease pain at the pump.

Households are on pace to spend an average of $4,500 on energy this year, up about $500 from last year and $900 higher than in 2003, according to Global Insight, a research firm.

The good news was that retailers around the country said there was less panic buying than after Hurricane Katrina struck.

Normally by this time of year, refineries are beginning to shift production from gasoline to heating oil. But analysts said oil companies will be under pressure from politicians and the public to produce enough gasoline to prevent shortages and keep prices from spiking much above $3 a gallon. That could push production of heating oil back later than usual, they said.

The loss of natural gas is potentially even more worrisome, analysts said, because disruptions to crude output can be offset by barrels from the rest of the world, plus the government's emergency reserve. There is no such safety valve for natural gas, and the country's ability to import liquefied natural gas is limited.

Early estimates were that Hurricane Rita will cost U.S. refiners about 800,000 barrels a day in oil refining capacity, on top of about 900,000 barrels a day still down due to Katrina.

Before Rita crashed ashore along the Texas-Louisiana border on Saturday, industry officials had worried that high winds or flooding could knock out electric lines that power refineries and damage pipelines that carry finished goods to consumers as far away as the East Coast.

By the time Rita came ashore Saturday, it had weakened from a Category 5 monster to a Category 3 hurricane.

The storm struck only a glancing blow at the Houston area, with the nation's largest concentration of oil refineries, but scored a direct hit around Port Arthur and Beaumont, in the southeast corner of Texas.

Valero Energy Corp. said its Port Arthur refinery could be out of operation for two to four weeks due to damage from Rita. The company said it expected its Houston and Texas City refineries to start some units late Monday or early today and be back to normal operations later in the week.

The key operating units at Total Petrochemical's Port Arthur refinery appeared to be in good shape, but the plant was still without power Monday, making it impossible to determine the amount of damage or when it might restart, said spokesman Rick Hagar. The refinery can process 240,000 barrels of oil a day.

Exxon Mobil Corp. was studying damage at its refinery in Beaumont. The company owns the nation's largest refinery, in the Houston area city of Baytown, and it did not appear seriously damaged. Exxon and Chevron Corp. reported shipping gasoline to retailers in Texas.

Royal Dutch Shell PLC said Monday that the Port Arthur refinery it owns in a joint venture with Saudi Refining Inc. remained without power, there was flood damage and severe winds damaged one key unit, power lines and other structures. The company gave no start-up date.

Shell said its refinery near Houston suffered only minor damage and is expected to start up in the next few days.

BP PLC said in a statement Monday that it was still assessing damage at its Texas City refinery, the nation's third largest. It said the plant had power and there didn't seem to be obvious damage. It gave no timetable for restarting the plant. BP also said it had found no major damage on its deep-water oil and gas platforms.

Rita sharply cut the flow of crude oil from the Gulf of Mexico, as oil production halted completely and 93 percent of manned platforms remained empty Monday, according to the federal Minerals Management Service.

--Information from the New York Times was used in this report.

[Last modified September 27, 2005, 02:45:31]