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The New York Times: Oil Price Falls Almost $1 After Rita: Posted Monday 26 September 2005

Published: September 25, 2005
Filed at 10:29 a.m. ET

LONDON (Reuters) - Oil prices fell nearly a $1 a barrel on Sunday after Houston refineries escaped damage from Hurricane Rita although plants further east in Port Arthur and Lake Charles were hit harder.

London Brent crude, open for a special weekend session, was off 94 cents at $61.50 a barrel by 0850 EDT (1250 GMT) after sliding $2.16 on Friday.

The New York Mercantile Exchange crude contract also opens on Sunday, at 1000 EDT (1400 GMT). It fell on Friday by $2.31 to $64.29 a barrel as dealers calculated a weakening Rita would veer wide of a cluster of refineries around Houston, Texas.

An assurance from the International Energy Agency, coordinator for the release of emergency stocks among 26 industrialized nations, that it would consider filling a supply disruption also helped undermine prices.

Rita made landfall early on Saturday as a category 3 hurricane having eased from a full strength category 5, arriving just four weeks after Hurricane Katrina sent crude prices to a record $70.85 a barrel.

It appears to have caused much less damage to the refining industry than Katrina, which has left four big refineries out of action for months.

``It could have been a heck of a lot worse. I have the feeling that we will bounce back quickly,'' was the assessment of Phil Flynn, analyst with Chicago-based Alaron Trading, of the U.S. oil industry's post-storm recovery after Rita.

The U.S. Department of Energy was ``cautiously optimistic'' that refineries in Houston suffered minimal damage, said spokesman Craig Stevens.

As company damage reports rolled in, there was damage reported at least one of the three refineries in Port Arthur, east of Houston.

Damage also was likely at the two refineries in Lake Charles, Louisiana where 15-foot storm surges were recorded but there was no immediate assessment from their operators.

Valero Energy Corp. said it sustained ``significant damage'' at its 250,000 barrel a day Port Arthur refinery and said a restart could take two weeks to a month.

Royal Dutch Shell and Total have yet to give restart times for their refineries in the same city.

Many of the other U.S. Gulf refineries appeared to have escaped unscathed and indications were that some with power around Houston were in start-up mode.

Exxon Mobil said its 557,000 barrel per day Baytown, Texas, refinery, the largest in the United States, had escaped significant harm.

Ahead of Rita offshore operators also closed U.S. Gulf crude production as a precaution. Half of those operations still have to restart after Katrina, although heavy OPEC production and high crude oil stocks have alleviated crude supply concerns.

Most offshore operators said they had not yet been able to assess the damage to crude production facilities.

Helping keep a cap on prices was an assurance from the International Energy Agency on the availability of government inventories following a 30-day release after Katrina.

The IEA said on Saturday it was assessing the impact of Rita and had held talks with the United States. The agency has said that if Rita caused crude or refined fuel supply disruption then it could order another release of oil from emergency reserves.

``...We would expect the U.S. to request IEA members to make a second, smaller release of strategic petroleum product stocks to follow the current 30-day release and the agency's recent public statements strongly signal their willingness to act,'' said SG Commodities on Friday.

In Nigeria, often a flashpoint for oil supply disruptions, a detained militia leader whose followers threatened to blow up oil facilities after his arrest has told them to refrain from violence, his lawyer said on Sunday.

Followers of Mujahid Dokubo-Asari issued a series of threats against the oil industry after his arrest on Tuesday, prompting the army and police to increase their presence in the restive Niger delta.

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