Updated from 2:21 p.m. EDT
Oil prices fell for a third day Wednesday as traders focused on Treasury Secretary John Snow's cautious prediction for 2005 economic growth.
Crude for October delivery closed down $1.46 to $64.50 a barrel after losing $3.51, or more than 5%, on Friday and Tuesday. Gasoline futures fell 3 cents to $2.02 a gallon. Natural gas futures fell 46 cents to $11.20 per thousand cubic feet.
Front-month crude is now $1.63 below its level just prior to Hurricane Katrina's arrival, while gasoline futures are up 10 cents.
Among oil stocks,
rose 0.5% to $61.36;
rose 0.2% to $62.46;
added 1.4% to $110.89;
fell 0.6% to $69.73; and
( RD) lost 1.4% to $64.67.
Speaking to analysts in Washington late Tuesday, Snow suggested that the hurricane's impact on gross domestic product will be borne this year.
"It would seem to make sense to think that we could see loss of GDP growth rate in the quarters ahead of half a percent or so," Snow said. The comments support energy bears who have long argued that oil prices, which remain up more than 50% this year, eventually will slow economic demand and serve as their own brake.
Further to that point, the Energy Department cut 60,000 barrels from its estimate of daily petroleum demand in the U.S. this year, citing "sharply higher prices."
Meanwhile, Gulf Coast rebuilding efforts continued overnight with five of the eight refineries that were shut down by the storm back on line. On the production side, roughly 60% of the region's crude output remains cut off by Katrina, down 10 percentage points from a day earlier.
A heavily damaged
platform, which produces 1,500 barrels of oil a day and 7.5 million cubic feet of gas, will probably remain shut for months, the company said. Also, shore-based receiving facilities at Venice, La., have been damaged by the storm.
Regulators warned Tuesday that 5% of U.S. refining capacity will probably be out for an extended period. Still, crude and gasoline futures both eased Tuesday as overseas producers represented by the International Energy Agency pledged to pump 2 million barrels a day of crude into world markets to alleviate the Katrina crunch.
About 4.16 billion cubic feet per day of natural gas production is shut in, equivalent to 41% percent of daily Gulf of Mexico production, according to the U.S. Minerals Management Service.
"The biggest concern now is natural gas," said Agbeli Ameco, managing partner at Enercast.com, a Denver-based research firm. "Natural gas contracts haven't come down their highs even though crude eased. The SPR release doesn't help the natural gas situation."
Natural gas will trade in a range of $9 to $12 per thousand cubic feet from now until April, Ameco predicted. "Lower storage levels and increased demand for heating oil and natural gas in the winter, especially in the northeast, will keep prices at record levels," he said.
"Should current market pricing hold, consumers could be facing annual average increases of 30%-plus to their natural gas heating bills relative to last winter," said Gabe Moreen, an analyst at J.P. Morgan, in a report. "Such significantly higher natural gas prices would likely burden gas utilities with increasing levels of bad debt expense and threaten to accelerate customer conservation trends."
Moreen mentioned gas utilities such as
( KSE) and
as heavily regulated entities that could be negatively impacted by rising gas prices.
The Energy Department's weekly inventory report will be released Thursday, pushed back a day because of the Monday holiday. Analysts expect a roughly 8 million barrel decline in U.S. crude stocks and a 6 million barrel fall in gasoline stocks.
The Energy Department also said that the U.S. distillate surplus that built up over the last several months will be important as seasonal production shifts to heating oil. But the more critical near-term product problem continues to be gasoline.
Gasoline inventory levels were at the bottom of a seasonal average even before Katrina struck.
Many companies have reported that damage to third-party facilities, such as pipelines, electric utilities, receiving terminals and processing plants, are major reasons for their production problems.
Companies can't restart production platforms if the pipeline to which they feed their fuels is damaged, or if an onshore processing plant is out of power.
reported that its Laurel field, Miss., oil field, which was producing 1,600 barrels of oil per day, was shut in on Aug. 28 and is currently shut in, waiting for the return of electrical service to the area.