A week of falling prices that took crude oil back to pre-Hurricane Katrina levels ended abruptly on 14 September, as prices spiked by nearly $2 a barrel on the back of new data showing that US crude and heating oil stockpiles dropped more than expected in the wake of the storm. After falling to $61.61 a barrel on 13 September, Spot Brent was trading at about $63.57 a barrel on 15 September compared with $63.08 a week earlier.
Data from the US Energy Information Agency (EIA) for the week ending 9 September showed that lower imports and output restrictions caused by the hurricane saw US crude stocks fall by 6.6 million barrels to 308.4 million barrels. The EIA also said that distillate stocks, which group heating oil, jet fuel-kerosene and diesel, had fallen 1.1 million barrels to 133.3 million barrels. With winter approaching in the Northern Hemisphere, market focus will gradually shift to distillates, and, as demand for heating fuels increases, the lowered stocks threaten to push prices higher still. The EIA said that US refineries were operating at 87 per cent capacity, following the shutdown of four major refineries in Louisiana as a result of the hurricane, and that 58 per cent of crude oil production in the US Gulf Coast remained at a standstill. It is expected to be two-three months before those refineries, accounting for more than 900,000 barrels a day of production, will be back in operation. There are also signs that rising fuel costs are having a negative effect on US economic growth. The EIA report showed that gasoline stocks grew by 1.9 million barrels to 192 million commercially available barrels in the first week of September, suggesting that higher oil prices are stifling demand. Washington has also revealed that retail sales fell by 2.1 per cent in August, even before Katrina hit, with car sales plunging 12 per cent. US industrial output in August was nearly flat, reflecting widespread shutdowns of oil platforms, refineries and chemical plants along the Gulf Coast.