As of Friday, September 2, 4:00 pm --SEE MOST RECENT--

According to the Minerals Management Service (MMS), as of 11:30 Central Time September 2, Gulf of Mexico oil production was reduced by over 1.328 million barrels per day as a result of Hurricane Katrina, equivalent to 88.53 percent of daily Gulf of Mexico oil production (which is 1.5 million barrels per day). The MMS also reported that 7.248 billion cubic feet per day of natural gas production was shut in, equivalent to 72.48 percent of daily Gulf of Mexico natural gas production (which is 10 billion cubic feet per day).

On Friday, September 2, the International Energy Agency (IEA) directed its member nations to make an extra 2 million barrels of oil per day available to the market for the next 30 days, with half of this contribution to come from United States' Strategic Petroleum Reserve (SPR). A large portion of the oil from outside of the United States will be released in the form of refined products. The United States will put up 30 million barrels of crude oil for sale from its Strategic Petroleum Reserve, with the proviso that the bids meet minimum acceptable levels. This oil is in addition to the 9.1 million barrels of oil that will be loaned out from the SPR to ExxonMobil, Valero, Placid, and ATI, with negotiations underway for additional loans as announced by the Secretary of Energy on September 1.

Petroleum

Crude oil prices and petroleum product futures and spot prices have dropped dramatically on Friday, September 2, due to news about the release of strategic inventories from the International Energy Agency and news about improvements in petroleum infrastructure, particularly for the Plantation and Colonial pipelines. As of the close of trading on Friday, the gasoline near-month futures price plummeted by 22.5 cents per gallon from yesterday, settling at 218.4 cents per gallon, while the heating oil near-month futures price declined 10.7 cents per gallon, settling at 209.11 cents per gallon. The NYMEX West Texas Intermediate (WTI) crude oil futures price dropped $1.90 per barrel from yesterday, settling at $67.57.

As of August 26, (the most recent data available), U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.5 million barrels from the previous week. At 321.4 million barrels, U.S. crude oil inventories are well above the upper end of the average range for this time of year. Total motor gasoline inventories declined by 0.5 million barrels last week, putting them near the bottom end of the average range. Distillate fuel inventories increased by 2.7 million barrels last week, and are above the upper end of the average range for this time of year. Total commercial petroleum inventories rose by 2.4 million barrels last week and now stand above the upper end of the average range for this time of year. Total product supplied over the last 4-week period has averaged 21.5 million barrels per day, or 2.3 percent more than averaged over the same period last year.

Electrical power has been restored to some of the refineries that were affected by Hurricane Katrina, and some other refineries are expected to have power restored within the next 7-10 days. This should allow some refineries to begin start producing again in the near future, but other refineries that were damaged more extensively from the hurricane may be down for some time to come. Several factors that may affect refinery production are highlighted in EIA's This Week in Petroleum.

The U.S. distillate surplus that built up over the last several months will certainly be important as seasonal emphasis shifts to heating oil. While distillate prices will react to crude price and related developments, the more critical near-term product problem relates to gasoline.

There continue to be reports in the media of gas stations in various parts of the country that are out of gas. While EIA does not monitor supplies at individual stations or localities, there are some reasons why this may be occurring at selected stations. With about 2 million barrels per day of crude oil refining capacity shut in or reduced due to Hurricane Katrina, approximately 1 million barrels per day (42 million gallons per day) of gasoline is not being produced. This represents about 10 percent of the nation's consumption, and is a major drop in the normal flow of gasoline through the system. In addition, major pipelines originating in the Gulf of Mexico area (namely the Plantation and Colonial product pipelines and the Capline crude oil pipeline) were initially shut down but have since been restarted, although at reduced volumes. As a result, the distribution of gasoline, particularly in the Gulf Coast, Midwest, and East Coast regions of the country, has now been significantly affected. Localities that were being served from gasoline terminals which already had low inventory levels, perhaps because they were expecting a delivery in the near future, could run out of supply before the next delivery arrives. Other areas that did have plenty of inventories on hand prior to the loss of the refineries and pipelines will be able to withstand the loss of supply for a longer time. However, it is impossible for EIA to know which terminals were well supplied and which ones were not prior to Hurricane Katrina, since EIA does not collect inventory data for individual terminals. But as soon as the affected service stations are able to receive additional gasoline, they should be able to re-open

Ports and Pipelines

On Friday, September 2, the Louisiana Offshore Oil Port (LOOP) was operating again, although at less than full capacity. A pipeline controlled by the port meets the Capline pipeline system in St. James, Louisiana, which connects to refineries. More than 10 percent of the nation's imported crude oil typically enters at the LOOP.

As of September 1, Capline (a major crude oil pipeline that runs from the Gulf Coast to Midwest refineries) had returned to service, with flows at 70 percent of capacity. Two major product pipelines from the Gulf Coast to the East Coast, Plantation and Colonial, dramatically improved their flow rates as of September 2, with Plantation running at 95 percent of capacity and Colonial pipeline at 66 percent of capacity. Colonial pipeline was expected to be above 80 percent capacity by sometime this coming weekend.

Natural Gas

As of the close of trading on Friday, September 2, the natural gas futures price for October delivery was down nearly 7 cents, to reach $11.69 per million Btu. In trading on the Intercontinental Exchange, the Henry Hub spot price was $11.75 per MMBtu, up $0.386 from yesterday (Thursday) and about $1.88 per MMBtu from last Friday's price (before the storm). At market locations across the Gulf region, price decreases today ranged up to $0.44 per MMBtu with an average of $0.27 per MMBtu. The overall average change in price was $0.14 per MMBtu.

There are reports that Hurricane Katrina may have damaged four natural gas processing facilities on the Gulf Coast with a combined capacity of 5.5 Bcf per day, which is the equivalent of almost 10 percent of total national production. Follow-up reports have not indicated expected outages of more than a few weeks, with many units expected on line within a few days. A full assessment of some facilities, however, will require onsite inspections. If these or other plants are inoperable for any length of time, the loss could delay a recovery of natural gas production in the area. Even if platforms and pipelines are either unaffected or readily restored to service, the gas often can't flow to market without treatment. In 2003 (the latest year with complete data), almost three-fourths of total U.S. marketed gas production was processed prior to delivery to market.