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
ebooks
ebooksAn introduction to the ground rules of British democracy
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: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy