Signs that Gulf Coast energy producers survived Hurricane Rita largely unscathed sent oil futures falling on Sunday, but analysts said consumers were likely to face tight supplies and higher prices — at least until refineries shut by the storm come back on line.
A rapid recovery for refiners hinges on power being restored to parts of Texas and Louisiana where facilities are concentrated, and Entergy Corp. said Sunday it will be several days before the full extent of what it described as significant damage is known.
"I'm not sure there should be a rush to exuberance here, even though we dodged a bullet," said oil analyst John Kilduff of Fimat USA in New York.
Nonetheless, energy traders seemed to breathe easier about fuel supplies knowing that oil platforms, pipelines and refineries were not hit as badly by Rita as they were by Hurricane Katrina.
The Coast Guard said Sunday it flew over offshore oil and natural gas platforms hugging the Gulf Coast, and checked in by telephone with refineries and chemical plants in the region, and that it did not see or hear about any major damage. "The initial report is good at this time," Chief Warrant Officer Adam Wine said.
A barrel of light crude for November delivery was quoted at $63.10 in evening trading on the New York Mercantile Exchange, down $1.13. Trading was very light, and prices ranged from $62.65 to $63.44 as traders assessed the storm damage.
Heating oil dropped 5.70 cents to $1.8950 per gallon, while unleaded gasoline fell 10.41 cents to $1.9875 per gallon.
On London's International Petroleum Exchange, which also opened trading earlier than usual, Brent crude futures tumbled $2.59 to $62.01.
The Nymex and IPE both extended electronic trading over the weekend in hopes of reducing the kind of volatility that followed Katrina. But trading was light.
Kilduff said oil prices could fall below $60 a barrel within a week if no major damage to Gulf Coast energy infrastructure emerges.
"My worry for a gasoline price spike is short term, really a one- to two-week window," he added.
On Sunday, the average retail cost of gasoline nationwide was $2.78 a gallon on Sunday, up 2 cents from the day before and 90 cents higher than a year earlier, according to the Oil Price Information Service of Wall, N.J.
Sixteen refineries shut down in anticipation of Rita and four remain shuttered almost a month after Hurricane Katrina, taking out more than 19 percent of the nation's fuel-manufacturing capacity.
Analysts are paying particularly close attention to seven refineries in Lake Charles, La., and Beaumont and Port Arthur, Texas — areas that took some of Rita's hardest punches.
"It's tough to say when power will be restored" in these areas, Entergy spokesman Checky Herrington said. "It's going to take a few more days to assess just because the damage is so severe."
Power outages in Texas and Louisiana have left more than a million customers without electricity in the aftermath of Rita.
ConocoPhillips, Calcasieu Refining Co. and Citgo Petroleum Corp., a subsidiary of Petroleos de Venezuela S.A., have refineries in Lake Charles. In Port Arthur, refineries are owned by Valero Energy Corp., Total S.A. and Motiva Enterprises LLC, a joint venture between Royal Dutch Shell PLC and Saudi Refining Inc.; Exxon Mobil Corp. has a refinery in Beaumont.
Exxon Mobil said there was no significant damage at its Beaumont plant, but gave no timetable for restarting, while Citgo said it would be ready to restart its refinery in Lake Charles as soon as there is electricity.
Motiva, which sustained wind damage to power lines and a cooling water-tower at its Port Arthur refinery, has no restart date for the plant. Valero said it will take two weeks to a month to repair damaged cooling towers and restart its Port Arthur refinery.
Refineries located in and around Houston fared much better and Exxon Mobil said workers would return today to begin restarting its 557,000-barrel-per-day Baytown refinery, the largest in the country.
Several oil and fuel pipelines that carry product from the Gulf Coast to markets in the East and Midwest were shut down prior to Rita's arrival, but no significant damage has been reported and some could resume limited service this week, assuming they have power.
The U.S. Minerals Management Service said Sunday that 666 platforms in the Gulf remained unstaffed, up slightly from Saturday. Oil production in the Gulf of Mexico was totally shut down, and more than 80 percent of natural gas output was off. Since Katrina, more than 33 million barrels of oil and 156 billion cubic feet of natural gas have been lost.
While analysts are concerned by this lost production and the smattering of refinery and utility damage reported so far, they are also relieved that Rita's impact wasn't as bad as originally feared.
Shell Oil Co. and Motiva said Sunday their North Houston and Pasadena, Texas, distribution terminals were providing fuel to service stations in Houston, where widespread gasoline shortages occurred as residents fled Rita.
For two days, the best a Shell station in Katy, Texas, could do was produce a front row view of the jammed traffic along Interstate 10's westbound, which also featured disabled vehicles with no gas and no prospects for getting fuel.
But on Sunday, it provided some much-needed relief to a steady stream of motorists filing into one of the station's 16 pumps.
Julie Marquardt, said she was worried on Saturday after the storm passed, but was relieved when she pulled in and had no trouble getting 12 gallons of fuel.
"You can see that things are starting to get better," she said.
Oil analyst Peter Beutel of New Canaan, Conn.-based Cameron Hanover Inc. said sporadic gasoline shortages and higher prices are possible in the week ahead, but he was encouraged by what he considers to be a significant psychological shift among energy traders.
"It seems at this point that the market is focusing more on the fact that the damage was less severe than expected, than on the fact that there was damage," he said. "The worst is behind us."
Contributing: Steve Quinn and Michael J. Martinez