Oil: Price falls on slowing demand, refiners delaying work

NEW YORK - Oil prices fell as petrol futures plummeted on signs of slowing demand growth and expectations that refiners would delay autumn maintenance to make up for supplies shut by Hurricane Katrina.

Slowing global oil demand growth may yet help offset the storm's devastating blow to America's energy hub and help the International Energy Agency (IEA) to fend off a petrol shortage, the West's energy watchdog said on Friday.

US light crude was down 39 cents at US$64.10 a barrel by 1542 GMT. Prices are down from a record US$70.85 last week. London Brent crude fell 14 cents to US$62.94.

Valero Energy Corp., the largest US refiner, said it will delay any maintenance plans that it can at its plants to keep fuel production high in the wake of Katrina. The US Department of Energy said a day earlier that refiners have volunteered to delay work on their plants that usually occur in the fall as petrol demand wanes.

Limiting losses on crude was the slow pace of the US oil industry's recovery after the storm heightened fears that tight supplies might last months.

Shell said on Friday only 60 per cent of its normal 450,000 barrels per day of crude output in the Gulf is expected to be back by the end of the year. Katrina damaged the topside of Shell's Mars platform, which produces about a third of its Gulf crude, and was one of the areas expected to be down through 2005.

About 5 per cent of US oil refining capacity may remain offline for several months after the storm shut down 10 per cent of refining capacity, the US Department of Energy said.

"The loss in potential petrol output from these plants alone is expected to be of the order of 600,000 barrels a day," said Barclays Capital in a report.

New data from the US Minerals Management Service dashed hopes of a swift recovery in production, revealing about 900,000 bpd, or 60 per cent, of US crude output from the Gulf of Mexico was still shut.

"It now appears that recovery of additional offshore production will be painstaking and we may be faced with prolonged outages of some rigs in addition to the refineries that were flooded," said brokers Refco in a report.

Oil's rally, which has pushed prices up by 50 per cent since the start of the year, is putting the brakes on consumption -- with the IEA revising down its forecast for world demand growth this year by 250,000 bpd to 1.35 million bpd.

Experts are forecasting that Katrina's destruction would cut US GDP growth by 0.5 to 1.0 percentage points.

Fuel use in the United States, the world's biggest consumer, could be reduced by 200,000 bpd this month after Katrina, the Paris-based IEA said.

To offset the shortages, the IEA is co-ordinating the release of 2 million bpd over 30 days in emergency stockpiles -- but only 369,000 bpd will be much needed petrol.

The IEA said Katrina had caused a potential products loss of 38 million barrels in September and up to 70 million barrels of crude and natural gas liquids (NGLs) up to early 2006.

Oil analysts fear the release will not be sufficient to address the US petrol shortage and that there will not be enough tankers to move it in any case.

But the IEA cited reports that around 15 tankers used for crude and fuel oil movement are being cleaned to ship products.

Some European politicians say the United States had itself to blame for oil shortages and urged Washington to adopt measures to cut consumption.

"If the US had the same energy efficiency as Europe we could save eight million barrels of oil a day," said Austrian Finance Minister Karl-Heinz Grasser.

Ministers from the 12 euro currency countries are meeting in the English city of Manchester, with the oil price issue one of the main tests of their ability to act in unison.

- REUTERS