Crude oil prices soar; Katrina forces closures

Crude oil soared to a record above $70 a barrel after Hurricane Katrina forced operations closures in the Gulf of Mexico.

Oil had its biggest gain in 29 months while gasoline and heating oil reached records as Katrina crossed the gulf, source of 30 percent of the country's oil output and 24 percent of its natural gas.

Crude oil for October delivery rose as much as $4.67, or 7 percent, to $70.80 a barrel in electronic after-hours trading on the New York Mercantile Exchange.

International Monetary Fund Managing Director Rodrigo de Rato said last week that "rising oil prices will present an increasing risk" to global economic expansion. U.S. wholesale prices rose in July by the most in nine months on energy costs, reinforcing expectations the Federal Reserve will raise interest rates to fight inflation.

Royal Dutch Shell Plc said it has shut 420,000 barrels of daily oil production in the gulf because of Katrina. The Louisiana Offshore Oil Port, which handles about 11 percent of U.S. imports, closed Saturday and has since halted all oil movements to shore.

Exxon Mobil Corp., the world's largest oil company, evacuated workers and shut about 50,000 barrels of daily oil production and 300 million cubic feet of gas, spokeswoman Susan Reeves said. The company removed 430 employees and contractors from its gulf facilities Sunday night, she said.

Chevron, the second-largest U.S. oil company, did not have figures immediately about the amount of oil and natural gas that will be shut, spokesman Matt Carmichael said. "We are still doing the math," he said.

Paul Sankey, senior oil analyst with Deutsche Bank Securities in New York, said Katrina "is more severe than we've thought; it's turned into a monster. The amount of lost production is equal to almost all the spare capacity in the world."

Oil prices jumped 22 percent after Hurricane Ivan tore through the gulf last year. Lost production peaked at 1.4 million barrels of oil daily and 6.5 billion cubic feet of gas, said the U.S. Minerals Management Service. Katrina's impact could match those numbers said oil analyst Paul Sankey.

U.S. supplies of refined products, including gasoline, jet fuel and diesel, may also decline as refineries near the path of the storm also shut down. ConocoPhillips, the biggest U.S. refining company, shut its Alliance refinery south of New Orleans. Chevron Corp. and Valero Energy Corp. also shut refineries and evacuated staff.