The US government said today that it could tap into its Strategic Petroleum Reserve if requested by refiners struggling to cope with the massive impact of Hurricane Katrina.
As the enormous storm tore through oil facilities in the Gulf of Mexico and reached the Louisiana coast, the Department of Energy said it was closely monitoring the situation. The region is home to a quarter of total US oil and gas production.
Based on past experience after other damaging hurricanes, opening up the 700 million barrel strategic reserve 'is on the table, and it's certainly a possibility, but there hasn't been a request yet', a DoE spokesman said.
'As we go over the next 24 to 48 hours, we'll be getting more information and we'll see where we go, but the request has to come from the refiners,' he added.
Meanwhile, oil prices topped $70 a barrel today for the first time as a powerful hurricane wreaked havoc in the crude-producing Gulf of Mexico, home to 25% of US oil and gas production.
Some analysts are now predicting that prices could aim for the once unthinkable $80 dollars a barrel - a level economists fear could severely dent consumer demand and curb business activities.
New York's main contract, light sweet crude for delivery in October, rose $2.57 a barrel to $68.70 in early trade. In overnight, electronic trade the price had breached the psychological barrier of $70 a barrel, blazing a new record high of $70.80. The London market was closed today for a bank holiday.
Crude had closed at $66.13 in the US market on Friday as the market nervously awaited the impact of the monstrous hurricane on the world's biggest economy. It had hit a record closing price on Thursday of $67.49, and briefly touched a record of $68 dollars late on Wednesday night - the highest point since it was first traded in 1983.
In London on Friday, the price of Brent North Sea crude oil for delivery in October gained 29 cents to $66.56 a barrel, not far off its record of $66.85 on August 14.
Over the weekend, Hurricane Katrina - which late last week had been classed as category one - gained strength and hit land early today as a category four or five hurricane, the maximum-strength rating.
Gulf of Mexico and onshore oil and natural gas facilities had closed ahead of the storm, a threat to facilities at Port Fourchon, Lousiana, near New Orleans, which handles around one-sixth of US oil supply, and rigs in the Gulf of Mexico.
Oil prices have been driving up to new record highs as refineries struggle to cope with booming energy demand around the world. Any problems with production anywhere have been sending prices up still further. The hurricane was expected to have a significant short and long-term impact on energy markets, impacting production offshore and onshore, and shutting in refining and processing facilities.
In Vienna today, OPEC spokesman Abdulrahman Al-Kheraigi said OPEC ministers might consider raising the cartel's production quotas when they meet September 19.
