NEW YORK – Crude-oil prices surged more than $1 a barrel Wednesday as traders braced for the possibility that Hurricane Rita could smash into key oil facilities in Texas.
Workers fled oil rigs in the Gulf of Mexico less than a month after Hurricane Katrina tore through the same region, as Rita strengthened into a Category 4 hurricane Wednesday.
Also Wednesday, the U.S. Department of Wednesday reported that the nation's crude inventories dropped 300,000 barrels to 308.1 million barrels in the week ending Sept. 16. That's still nearly 12 percent above year-ago levels.
Gasoline inventories rose 3.4 million barrels to 195.4 million, but they remain more than 5 percent below year-ago levels.
Inventories of distillate fuels, which include heating oil, rose 800,000 barrels to 134.1 million, more than 5 percent above year-ago levels.
The report came as a surprise to analysts, who had expected a rise in crude stocks and a drop in gasoline and distillate stocks, according to a survey by Dow Jones Newswires.
Light, sweet crude for November delivery rose $1.35 to $67.55 a barrel in morning trading on the New York Mercantile Exchange. It was the first trading day that November was the front-month contract. October futures fell $1.16 to close at $66.23 a barrel Tuesday in New York.
Heating oil jumped nearly 5 cents to $2.06 a gallon, while gasoline surged nearly 13 cents to $2.1050 a gallon.
On London's International Petroleum Exchange, November Brent crude oil futures gained $1.01 to $65.21 a barrel.
Crude oil prices are nearly 45 percent higher than a year ago. They reached an intraday record of $70.85 on Aug. 30 when Katrina made landfall, wreaking destruction on oil refineries and other facilities in Louisiana and surrounding areas.
Forecasters said Rita's winds have reached 135 mph as it churns toward landfall later this week on the Gulf Coast. That is now predicted for Saturday somewhere between northern Mexico and western Louisiana, most likely in Texas.
Oil refining in Texas accounts for a quarter of the nation's total oil output. Rita is also thwarting recovery efforts as refineries gear up for the Northern Hemisphere winter, the peak season for production of distillate fuels that include heating oil, jet fuel, kerosene and diesel.
An offer by the Organization of Petroleum Exporting Countries to release an extra 2 million barrels of oil a day did not seem to quell the market as traders' focus remained on the storm and questions of supply and demand.
"The crude oil that is going to be supplied is the heavy, sour kind, and there is not much refining capacity for that," said Victor Shum, oil analyst at energy consultants Purvin & Gertz in Singapore. "Louisiana refineries can process that, but they are shut down."
Light, sweet crude is easier to refine into products, and with winter approaching, there is an urgency to process distillates.
Natural gas again reached a new peak of $12.900 per 1,000 cubic feet before easing to $12.878.
"Natural gas is shooting off the charts," said Shum. "We are entering into winter and refineries need to build up heating oil inventories but it's a problem when storms keep key facilities shut."
The U.S. Minerals Management Service said Tuesday that 136 platforms, mostly in the New Orleans area, remain unstaffed from Katrina and ahead of Rita. That is 53 more than Monday.
The industry has lost production of more than 26 million barrels of oil since Aug. 26, when companies first evacuated for Katrina – about 4.7 percent of the Gulf's yearly oil output, the agency said.
Numerous companies – Valero Energy Corp., BP PLC, Shell Oil, Apache Corp., Exxon Mobil Corp., ConocoPhilips Co., Chevron Corp., Anadarko Petroleum Corp. and Marathon Oil Corp. – have all abandoned facilities in the Gulf of Mexico ahead of Rita.
Markets were also watching developments in Nigeria, where a militia threatened to blow up oil installations if the government did not release its leader, whom police arrested for alleged treason. Nigeria is the world's eighth-largest oil exporter and the fifth main supplier to the United States.
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Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.
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