By SANDY SHORE
AP business writer
September 06, 2012
Oil rose as Isaac gathered strength on its way into the heart of the Gulf of Mexico’s oil and refinery operations.
The price got a boost after midday when forecasters said Isaac had strengthened into a Category 1 hurricane with 75-mph winds.
Benchmark oil rose 86 cents to $96.33 per barrel in New York as traders waited to see how much, and for how long, the storm’s powerful winds and driving rains will affect oil production and refinery operations in the region.
Nearly 94 percent of oil production in the Gulf, or 1.3 million barrels per day, has been halted, the U.S. government said Tuesday.
At least 1 million barrels per day of refining capacity is expected to be shut down, which is about half the refining capacity in the storm’s predicted path. The U.S. consumes about 19 million barrels of oil products per day.
Isaac was expected to make landfall over southeastern Louisiana either late Tuesday or early Wednesday.
“We have to wait and see. A lot of refinery capacity was taken down, and the key is going to be how the restart goes,” said Andrew Lebow, senior vice president of energy derivatives at Jefferies Bache.
Refineries should escape significant damage if Isaac remains a Category 1 storm. The bigger issue is whether they’ll have access to electricity. Some analysts say they could be up and running within hours without damage or a loss of electricity. Others say they likely will remain out of operation for about three days.
Price Futures Group analyst Phil Flynn said oil producers will take more oil out of inventory in the coming weeks to make up any lost production. The storm also will slow imports of oil into the Gulf.
Pump prices continued to increase ahead of Isaac’s landfall. The national average for a gallon of gasoline rose less than a penny to $3.756 per gallon, according to AAA, Wright Express and the Oil Price Information Service. That’s nearly 4 cents more than a week ago.
Gas prices in Mississippi, Alabama, Florida and Louisiana have tallied even bigger increases.