Updated from 11:32 a.m.Crude oil futures tumbled again Wednesday as traders appeared to take their cues not from government data showing inventory declines but from news that demand for gasoline and distillates has dropped. Trading was chopping for some time after the latest oil inventory numbers were released, but at the end of the session light, sweet crude for November delivery had a loss of $1.11 to $62.79 a barrel on the Nymex. Natural gas fell 4 cents to $14.18 per mmBtu. Unleaded gasoline futures dropped 11 cents to $1.92 a gallon, and heating oil slipped 3 cents to $2.013 a gallon. The government's weekly inventory report showed a 300,000-barrel decline in crude inventories. Gas stocks were down by 4.3 million barrels, while distillate stores fell by 5.6 million barrels. Over the last four weeks, gasoline demand has averaged nearly 8.8 million barrels a day, or 2.6% below the same period last year, the government said. Distillate fuel demand has averaged 3.9 million barrels a day in the last month, down 3.8% from a year ago. The U.S. Energy Information Administration said refineries operated at 69.8% of their capacity last week, and gasoline and distillate production declined an average of 7.5 million barrels a day and 3 million barrels a day, respectively. U.S. crude oil imports averaged 8.1 million barrels a day last week, down nearly 1.6 million barrels a day from the previous week. Total motor gasoline imports last week averaged above 1.4 million barrels a day, the highest weekly average ever. Distillate fuel imports averaged 310,000 barrels a day, an increase of 126,000 barrels over the previous week. The Interior Department's Minerals Management Service said of the 4,000 platforms in the Gulf of Mexico that it administers, 3,050 were in the path of Hurricanes Katrina and Rita. A preliminary damage assessment indicates that 108 of the older facilities were destroyed. Those platforms account for 1.7% of the Gulf's oil production and 0.9% of gas production.
Another 53 platforms sustained significant damage. "As a result, only a very small percentage of production is expected to be permanently lost," a statement from the MMS indicated. Major new facilities fared better in the hurricanes, with only one destroyed and four receiving significant damage. Repairs are underway on the wounded facilities, but a "substantial portion" of production will probably need several months before it can resume. The MMS said oil production equal to 87% of the Gulf of Mexico's daily output remains shut down, while gas production representing 69% of the daily total is shuttered. Among corporate news in the sector, Citigroup downgraded BP ( BP)to hold from buy. Citi slashed its third-quarter earnings estimate on BP by 21% and cut its full-year prediction by 4%, largely because of the effects of Katrina and Rita. BP said Tuesday the storms will cut its third-quarter replacement-cost profit before interest and taxes by more than $700 million. Shares of BP were down $1.54 to $67.26. Credit Suisse First Boston lowered its rating on Houston-based drilling contractor Pride International ( PDE) to neutral from outperform. Rowan ( RDC), which had some of its rigs damaged or destroyed by Hurricane Rita, said it was taking steps to replace lost revenue. The Houston-based company said it planned to have nine additional land rigs by the end of the second quarter of 2006. The company is also reviewing a plan to accelerate the construction of two jack-up rigs. Entergy ( ETR) has restored power to more than three-quarters of the 766,000 customers without power at the peak of Rita. The New Orleans-based company said total restoration costs for the repair and replacement of electrical facilities damaged by the storm will range from $400 million to $550 million. Although it expects to report lower revenue, Entergy believes it can meet its current obligations and fund the restoration.