Updated from 2:03 p.m. EDT
Crude closed below $67 a barrel Tuesday as traders backed off some of their aggressive long positions as Hurricane Rita churned into the Gulf of Mexico.
The October contract, which rallied 7% Monday as Rita gathered strength in the Caribbean, ended down $1.16 to $66.23 a barrel on Nymex. Other energy futures also pulled back, with unleaded gasoline losing about 7 cents to end at $1.98 a gallon.
Rita, packing sustained winds of about 100 mph, was upgraded to Category 2 as it moved west Tuesday near the Florida Keys. Forecasters expect the storm to continue through the Gulf of Mexico, with the most likely landfall coming at the end of the week in Texas.
The storm was most recently reported 80 miles south of Key West.
Officials in Galveston, Texas, have called for a voluntary evacuation of that Gulf city and oil companies began evacuating personnel from potentially endangered facilities.
"Everyone is stressed out by Rita," said Peter Zeihan, senior analyst at Stratfor. "It's one hell of a sucker punch."
Three weeks after Katrina, traders remain wary that the latest storm will impact oil and natural gas infrastructure concentrated along the Texas coast around Houston. Any evidence Rita is tracking north toward the storm-ravaged coast of Louisiana could occasion further buying in futures markets. A southern route toward Mexico would have the opposite effect.
"Our view is that most of the bad news is already in the market," said Mike Armbruster, energy analyst for Altavest Worldwide Trading. "We're in a topping process."
In a footnote to Tuesday's trading, leaders of the Organization of Petroleum Exporting Countries approved a measure Tuesday to authorize the sale of about 2 million barrels a day of excess crude from an emergency supply buffer. Some analysts doubt the excess crude would find buyers in world markets.
"I don't see anything really market-moving coming from OPEC," Armbruster said. "They don't have the power to flood the market with oil like they did in the past."
In company news,
said it restarted an oil sands upgrader that was damaged by fire last January and that it was making progress in returning the company's oil sands upgrading operation to full production. Shares of the Alberta, Canada-based energy company were off $1.21 to $60.59.
Lehman Brothers upgraded
National Fuel Gas
from underweight to overweight. Shares of the Williamsville, N.Y.-based energy company were up $1.28 to $34.09.
said its New Orleans subsidiary is considering a bankruptcy filing to alleviate liquidity constraints stemming from Hurricane Katrina. Louisiana-based Entergy says the inability to deliver power to customers will cut revenue at its Entergy Louisiana and Entergy New Orleans units, where up to 170,000 customers are still without power. Entergy was down 41 cents to $74.83.
MarkWest Energy Partners
said late Monday it would buy the Javelina gas processing and fractionation facility in Corpus Christi for a total of about $355 million from
El Paso Corp.
. Shares of MarkWest were up $3.05, or 6.30% , to $51.50.
Prudential Equity Group raised its price targets on several oil and gas exploration companies, citing commodity price gains.
was raised to $98 from $92;
to $77 from $70;
Devon Energy Partners
to $72 from $64; and />
Chesapeake Energy Partners
to $35 from $29.