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Crude Jumps on Storm Fears

The October contract surges above $67 a barrel as Rita churns.
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Updated from 3:31 p.m. EDT

Oil prices surged past $67 a barrel Monday as traders braced for another tropical storm that is gathering strength in the Caribbean.

Crude for October delivery rose $4.39, or about 6.9%, to close at $67.39 on Nymex as Tropical Storm Rita approached the Bahamas with sustained winds of 60 mph. Forecasters say Rita, the 17th named storm of the season, could become a hurricane by tonight before rolling westward through the Gulf of Mexico.

The Nymex gas contract jumped 13.6% to $12.66 per million British thermal units. Gasoline futures rose about 25 cents, or 14.4% to close at $2.04 a gallon. Heating oil rose 20.37 cents, or about 11.09%, to close at $2.04.

"The edgy market is a response to fears about the hurricane coming into the Gulf and wiping out production facilities," said Paul Boland, senior market analyst at Alaron Trading. "Everyone's on their toes."

Forecasters say Rita's center will pass over or near Andros Island in the Bahamas tonight and approach the Florida Keys Tuesday morning . A hurricane warning is in effect for the Florida Keys, the southern tip of Florida's mainland, and parts of the Bahamas and a mandatory evacuation was issued for all of the lower Florida Keys.

Rita is most likely to make U.S. landfall in Texas toward the end of the week, though a turn toward the north -- where Louisiana remains decimated three weeks after Katrina -- isn't out of the question.

"There is deep concern about this storm causing more flooding in New Orleans," President Bush told reporters during a Homeland Security council meeting.

The front-month crude contract lost about 2% last week. The price has been held back by the emergency release of about 2 million barrels a day of crude by the International Energy Agency and intermittent sales out of the U.S. strategic petroleum reserve.

OPEC is expected to approve on Tuesday a plan to sell about 2 million extra barrels a day from its own supply cushion, although the impact of the sales is expected to be limited with Rita dominating market psychology.

"(OPEC) is a blip on the radar screen compared to hurricane," Boland said.

In company news,



agreed to a 30-year production-sharing contract with Indonesia's PT Pertamina for the Cepu oil field in East Java. In addition, Prime-Tass news agency is reporting that Exxon has found an extra 560 million barrels off the Russian island of Sakhalin.

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