Crude price breaks $70 as Gulf of Mexico oil fields are paralysed

The rise of almost $4 in just one day wiped out the impact of overnight comments from the White House that the administration might release oil from its Strategic Petroleum Reserve to bring prices down.

Traders ignored the political intervention to focus on the impact the hurricane had had on oil production and refinery capacity in the Gulf.

Katrina has shut 95 per cent of oil production from the Gulf of Mexico, which is home to a quarter of American production, according to the US Minerals Management Service.

"There's going to be a lot more damage offshore than there will be to the refineries," said Peter Beutel, president of the trading consultant Cameron Hanover. "But in this age, losing even one refinery would be worse than losing a production facility." The US Department of Energy said that at least nine US refineries were closed as a result of the hurricane, with another four reducing production rates.

An oil drilling facility broke free of its mooring in Mobile Bay, Alabama, and slammed into a bridge because of high winds from the hurricane, the Alabama Department of Transportation said.

At least six companies reported rigs adrift, listing or sunk. One company, Newfield Exploration, said that it had lost one of its production platforms in the eastern Gulf.

A senior Republican said yesterday that the White House was likely to release oil from the national emergency stockpile.

Republican Joe Barton of Texas, said to CNBC: "The president will make a decision [to use the Strategic Petroleum Reserve] in the next couple of days."

The Energy Department said that it had already received a request from a hurricane-hit refiner who was anxious to borrow crude oil from the SPR.

In New York, oil prices jumped by $3.70 to $70.90 a barrel, the highest nominal figure ever recorded - although less in dollar terms than prices achieved during the 1970s oil crisis.

The surge was matched by a jump of $3.37 a barrel to $68.24 in London where markets reopened after the August bank holiday.

Dominic Bryant, an economist at BNP Paribas in London, said that prices could hit $80 in the near term. "If damage to the infrastructure is found to be reasonably severe, prices will increase over the coming weeks," he said.

Other analysts warned that there may be worse to come as the peak hurricane season was not due until mid-September through to mid-October.

"We've had two hurricanes hit the Gulf coast already," said Deborah White, senior energy analyst at SG Commodities in Paris.

"The primary uncertainty right now is the extent of damage, and headlines there will go straight into prices."

Rising oil prices will cause headaches for Gordon Brown and his fellow finance ministers ahead of a key meeting of the G7 nations and the International Monetary Fund next month.

The IMF is almost certain to cut its growth forecasts in the light of the high oil price, which pushes up prices of manufactured goods and reduces households' disposable incomes.

It also drives up inflation and forces central banks to raise interest rates - delivering another blow to cash-strapped consumers.

Insurance companies are also likely to be major victims. Fitch Ratings, the financial ratings agency, said Katrina would be the largest insured loss from a single event since the World Trade Centre attacks and that uninsured losses could match those covered.

Munich Re, the world's biggest reinsurer, said its costs from Katrina might reach €400m (£273.5m).

The Lloyd's of London market said it expected to receive significant insurance claims but said it was well-equipped to manage the financial impact.

Eqecat, a US firm that uses computer models to predict claims, projected insured costs of between $9bn (£5bn) and $16bn (£8.96bn).

Last year was the costliest ever for US natural disasters as four hurricanes - Charley, Ivan, Frances and Jeanne - prompted $22.9bn (£12.8bn) in insurance claims.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Sport
Seth Rollins cashes in his Money in the Bank contract to win the WWE World Heavyweight Championship
WWERollins wins the WWE World Heavyweight title in one of the greatest WrestleMania's ever seen
News
news
News
i100
Arts and Entertainment
tvPoldark, TV review
News
(David Sandison)
newsHow living on a houseboat meant I didn't officially 'exist'
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor