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Oil prices rise as Gustav looms Oil prices rise as Gustav looms
(about 2 hours later)
Oil prices have risen more than $1 after energy firms shut down almost all oil production in the Gulf of Mexico as Hurricane Gustav approaches the US. Oil prices have risen by more than a dollar after energy firms shut down oil production in the Gulf of Mexico as Hurricane Gustav approaches the US.
The storm is set to hit the Louisiana coast west of New Orleans on Monday. The storm is set to hit the Louisiana coast at midday local time on Monday.
Light, sweet US crude was up $1.04 at $116.50 a barrel in Asian trading. London Brent crude was at $115.02. Light, sweet US crude was up $1.54 at $117 a barrel in Asian trading. London Brent crude was up $1.42 at $115.47.
Analysts said that Hurricane Gustav may inflict more damage than 2005's Hurricane Katrina to the region's oil rigs and refineries. Analysts said that Gustav may inflict more damage to the region's oil rigs and refineries than hurricane Katrina in 2005.
Massive power supply cuts are likely and its hard to prepare a refinery against any kind of flooding Anthony Nunan, analyst, Mitsubishi
The region produces 25% of the US's crude oil and 15% of its natural gas.The region produces 25% of the US's crude oil and 15% of its natural gas.
About 4,000 offshore oil and gas facilities are located in the US gulf, 100 of which were badly damaged three years ago by Katrina and the follow on Hurricane Rita.About 4,000 offshore oil and gas facilities are located in the US gulf, 100 of which were badly damaged three years ago by Katrina and the follow on Hurricane Rita.
Crude shutdown
"This is right on the bull's eye," said Anthony Nunan, an analyst at Mitsubishi in Tokyo.
"Massive power supply cuts are likely and its hard to prepare a refinery against any kind of flooding. If there's a very prolonged outage, a big rally is possible" he said.
Energy companies have closed down more than 96% of the area's oil output and 82% of gas as of Sunday afternoon US time, the US Minerals Management Service said.
Exxon Mobil, Royal Dutch Shell, BP and North America's largest refiner Valero Energy were among the firms that have shut down Gulf Coast refineries.
Altogether, around 2.4 million barrels of refining capacity has been halted, 15% of the nation's total, according to figures from energy group Platts.
The Category Three storm is also expected to hit other industries in the region including sugar and shipping.
'Katrina's legacy''Katrina's legacy'
Authorities have ordered the evacuation of New Orleans and an estimated 1.9 million people along the Gulf coast have been heading inland.
Crude prices had increased last week as concern mounted about Gustav, before finishing slightly down on Friday.Crude prices had increased last week as concern mounted about Gustav, before finishing slightly down on Friday.
Energy companies, including BP and Shell, have closed down more than 96% of the area's oil output and 82% of gas as of Sunday afternoon US time, the US Minerals Management Service said.
"This is Katrina's legacy," said Phil Flynn of Alaron Trading in Chicago."This is Katrina's legacy," said Phil Flynn of Alaron Trading in Chicago.
"The industry is much more prepared and taking things much more seriously. That's why so much has been shut down so quickly.""The industry is much more prepared and taking things much more seriously. That's why so much has been shut down so quickly."