Oil prices jump on fear of Hurricane Ivan's path

WASHINGTON -- As oil prices shot up more than $1 a barrel Monday in the face of Hurricane Ivan's changing path, several large oil and natural gas producers evacuated rigs in the Gulf of Mexico.

"It's all fear, it's all speculative buying," said Agbeli Ameko, managing partner at the Denver-based energy research firm Enercast.com, adding that the actual loss of supply, at least for now, was negligible.

Light sweet crude for October delivery rose $1.06 to settle at $43.87 per barrel on the New York Mercantile Exchange as Ivan pummeled the Cayman Islands, then strengthened to a Category 5 storm, with maximum sustained winds of 160 mph, as it headed for western Cuba.

As a precautionary measure, Shell Oil Co. announced that 750 workers would be evacuated from the Gulf of Mexico, and approximately 272,000 barrels of oil and 880 million cubic feet of gas would be shut-in, or cut off.

"To put this in perspective, when a pipeline blows up in Iraq, that can cause a 300,000-barrel-a-day reduction in output," Ameko said. Assuming no major damage occurs to Shell's production platforms, Ameko said pumping could resume within a few days after the storm passes.

ChevronTexaco Corp. and Newfield Exploration Co. have also ceased some production. Other companies have evacuated employees, analysts said, but have not announced that any production would be shut-in.

"It's not only the production shut-in that's a problem," Ameko said. "The market is very concerned about the strength of the storm. It could cause quite a bit of damage."

Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said the worst-case scenarios would be prolonged disruptions to oil and natural gas production, or damage to refineries along the Louisiana coast.

He said the run-up in energy futures prices Monday was evidence of a market "acting cautiously, but not irrationally."

Last week oil prices fell sharply when it seemed that Ivan would bypass the Gulf's major production and refining operations. But as the apparent direction of the storm changed, so did energy futures prices.

October natural gas futures rose 28 cents Monday on Nymex to $4.85 per 1,000 cubic feet.

Analysts noted that oil tankers have been delayed as a result of the rough weather and that some refineries had shut down as a precaution, explaining that these interruptions could show up in the government's weekly oil-supply report, which is released every Wednesday.

"That could give us a fairly bullish set of DOE (Department of Energy) figures," said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Conn.-based energy consulting group.

Although the nation's supply of commercially available oil is 2 percent higher than last year, traders have been nervous all summer due to the thin margin of spare output capacity worldwide and the possibility of output disruptions in Iraq, Russia and Venezuela.

With the exception of sporadic export troubles out of Iraq, the global supply chain has remained intact.

The highest closing price for Nymex-traded crude futures was $48.70, on Aug. 19.

On an inflation-adjusted basis, today's prices are about $13 below the level reached leading up to the first Gulf War.

In other Nymex trading Monday, October heating oil futures rose 4.10 cents to $1.2052 per gallon, while gasoline futures gained 3.72 cents to $1.2014 per gallon.