NEW YORK - The U.S. energy sector made slow progress on Thursday in its recovery from Hurricane Gustav with some 25 percent of U.S. crude oil production and 11 percent of U.S. refining still shut in the storm's wake.
Production shutdowns in the Gulf of Mexico have already cut 7.4 million barrels of cumulative output, about a third of the amount of oil the United States consumes in a day, according to government data.
Analysts said dwindling global energy demand has muffled the impact of Gustav on energy prices, even though it may be weeks before output recovers completely as oil companies check offshore platforms for damage and await reliable electricity to power refineries on shore.
"I've got to believe that the market, in it's wisdom, is looking at other factors and is preoccupied with the state of the economy, declining demand and a strengthening dollar," said Peter Beutel, president of Cameron Hanover, New Canaan, Connecticut.
As of 11:30 a.m. CDT (2:30 p.m. EDT) Thursday, 95.2 percent of U.S. oil production and 87.5 percent of U.S. natural gas production from the Gulf of Mexico remained shut, the Minerals Management Service said. A day earlier, 95.8 percent of oil production from the Gulf was shut along with 91.6 percent of natural gas output.
The Gulf of Mexico has a capacity to produce 1.3 million barrels per day of oil, about a quarter of total domestic production, and 7.4 billion cubic feet per day of natural gas, about 15 percent of domestic production.
Even so, oil prices fell $1.46 on Thursday to settle at $107.89 a barrel, extending a decline from the mid-July peak over $147 a barrel.
Experts said Gustav's damage to oil refineries may have contributed to the decline in oil prices. Refineries are the main drivers of crude oil demand, distilling the raw product into fuels like gasoline and diesel.
Some 11 refineries representing 11.2 percent of U.S. fuel production capacity remained idled Thursday in the wake of Gustav, and another 7 remained at reduced rates.
Several of the refineries have said they found no damage from Gustav, but can not restart until reliable power is restored.
"At this stage, the real story is the power grid and that's kind of what's driving all the timelines. It seems like the refineries came through relatively unscathed and no real physical damage there, but until they actually have power, they can't restart their units," said Rick Mueller, a crude oil analyst with ESAI.
Gustav was the first big hit to U.S. energy supplies since 2006, when hurricanes Katrina and Rita wrecked 100 offshore oil rigs and flooded several key refineries, sending energy prices to then-record highs.
Energy experts said U.S. fuel stockpiles appeared high enough this time around to compensate for a temporary reduction in nationwide production, particularly as energy demand shrinks under the weight of high prices and a soft economy.
U.S. crude oil stockpiles were running at 303.9 million barrels, about 5 percent below last year, while gasoline and distillate supplies were running just slightly below last year, according to the Energy Information Administration.
Demand for fuel, meanwhile, is running about 3.5 percent below a year ago, according to the EIA.
Production shutdowns in the Gulf of Mexico have already cut 7.4 million barrels of cumulative output, about a third of the amount of oil the United States consumes in a day, according to government data.
Analysts said dwindling global energy demand has muffled the impact of Gustav on energy prices, even though it may be weeks before output recovers completely as oil companies check offshore platforms for damage and await reliable electricity to power refineries on shore.
"I've got to believe that the market, in it's wisdom, is looking at other factors and is preoccupied with the state of the economy, declining demand and a strengthening dollar," said Peter Beutel, president of Cameron Hanover, New Canaan, Connecticut.
As of 11:30 a.m. CDT (2:30 p.m. EDT) Thursday, 95.2 percent of U.S. oil production and 87.5 percent of U.S. natural gas production from the Gulf of Mexico remained shut, the Minerals Management Service said. A day earlier, 95.8 percent of oil production from the Gulf was shut along with 91.6 percent of natural gas output.
The Gulf of Mexico has a capacity to produce 1.3 million barrels per day of oil, about a quarter of total domestic production, and 7.4 billion cubic feet per day of natural gas, about 15 percent of domestic production.
Even so, oil prices fell $1.46 on Thursday to settle at $107.89 a barrel, extending a decline from the mid-July peak over $147 a barrel.
Experts said Gustav's damage to oil refineries may have contributed to the decline in oil prices. Refineries are the main drivers of crude oil demand, distilling the raw product into fuels like gasoline and diesel.
Some 11 refineries representing 11.2 percent of U.S. fuel production capacity remained idled Thursday in the wake of Gustav, and another 7 remained at reduced rates.
Several of the refineries have said they found no damage from Gustav, but can not restart until reliable power is restored.
"At this stage, the real story is the power grid and that's kind of what's driving all the timelines. It seems like the refineries came through relatively unscathed and no real physical damage there, but until they actually have power, they can't restart their units," said Rick Mueller, a crude oil analyst with ESAI.
Gustav was the first big hit to U.S. energy supplies since 2006, when hurricanes Katrina and Rita wrecked 100 offshore oil rigs and flooded several key refineries, sending energy prices to then-record highs.
Energy experts said U.S. fuel stockpiles appeared high enough this time around to compensate for a temporary reduction in nationwide production, particularly as energy demand shrinks under the weight of high prices and a soft economy.
U.S. crude oil stockpiles were running at 303.9 million barrels, about 5 percent below last year, while gasoline and distillate supplies were running just slightly below last year, according to the Energy Information Administration.
Demand for fuel, meanwhile, is running about 3.5 percent below a year ago, according to the EIA.
