Crude oil in New York fell a second day on expectations declining demand from U.S. motorists and increased refinery output will help ensure adequate supplies of gasoline and heating fuel.

Crude oil in New York fell a second day on expectations declining demand from U.S. motorists and increased refinery output will help ensure adequate supplies of gasoline and heating fuel.

Refineries increased operating rates to 74.9 percent of capacity last week, up 5.1 percentage points from the week before, the Energy Department said in a report yesterday. Gasoline fell after the report showed production jumped 5.1 percent as refiners reopened plants shut by hurricane damage.

“We’re going to move lower from here,” said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. “It’s not going to take months and months to get all these refineries back,” and production in the Gulf of Mexico is rising, he said.

Crude oil for November delivery fell as much as 33 cents, or 0.5 percent, to $ 62.75 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $ 62.90 at 7:15 a.m. Singapore time.

Yesterday, the November contract fell $ 1.04, or 1.6 percent, to $ 63.08. Futures have declined 11 percent since reaching a record $ 70.85 a barrel on Aug. 30, the day after Hurricane Katrina made landfall in August.

Gasoline for November delivery fell 0.84 cent, or 0.5 percent, to $ 1.7495 a gallon in after-hours trading. It dropped 6.97 cents, or 3.8 percent, to $ 1.7579 yesterday, the lowest close since Aug. 1.

Storm Damage

Hurricane Katrina, and Rita, which struck a month later, almost halted oil production in the Gulf of Mexico, which accounts for about 30 percent of U.S. oil output. The storms shut as much as 29 percent of the country’s refining capacity, damaging some plants and cutting power to others.

Royal Dutch Shell Plc said it started some utility sub- systems at its Port Arthur, Texas, refinery, which is operated by Motiva Enterprises LLC, a joint venture between Shell and Saudi Refining Inc. The 275,000 barrel-a-day capacity facility may re-start sometime this month, Shell said in a statement on its Web site.

Exxon Mobil Corp said power has been restored to its 190,000 barrel-a-day Chalmette, Louisiana, refinery. “Key utilities” have also been restored at Exxon’s Beaumont, Texas, refinery, which has a capacity of 348,500 barrels a day. Minor repairs and equipment checks are “progressing rapidly” in preparation for start-up, Exxon said in a statement yesterday.

Daily production in the Gulf rose 15,021 barrels yesterday, leaving output 69 percent below normal, the U.S. Minerals Management Service said yesterday. Production may still be 33 percent below pre-storm levels in December, according to an Energy Department assessment.

Product Inventories

“Repairs are proceeding apace,” said Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York. “Discretionary driving can be cut back but you have got to heat your house. Heating oil will soon lead the market.”

Gasoline inventories fell 2.7 million barrels to 192.8 million last week, the Energy Department report showed. A decline of 2 million barrels was expected, according to the median forecast from a Bloomberg survey of 14 analysts. Supplies of distillate fell 3.4 million barrels to 124.6 million. Analysts expected a decline of 2.3 million barrels.

“Refineries boosted production of both gasoline and distillate fuel,” said Rick Mueller, an analyst with Energy Security Analysis Inc. in Tilburg, the Netherlands. Declines in refined-product inventories “were already priced into the market so the focus shifted,” he said.

Gasoline demand fell 57,000 barrels a day to an average 8.8 million barrels a day, the report showed. Consumption has averaged 8.8 million barrels a day during the past four weeks, the department said.

Heating Fuel

Demand for distillate fuels, a category that includes heating oil and diesel, slipped 125,000 barrels to 3.9 million last week. Distillate fuel consumption has averaged 3.9 million barrels over the past four weeks, 4 percent less than during the same period last year, the department said.

Heating oil for November delivery fell 0.84 cents, or 0.4 percent, to close at $1.9885 a gallon in after-hours trading. It fell 1.88 cents, or 0.9 percent, to $1.9969 yesterday.

U.S. crude-oil supplies climbed 1 million barrels to 306.4 million last week, the Energy Department reported, about half the increase expected, according to the median forecasts from a Bloomberg survey of 14 analysts before the report.

Source : www.bloomberg.com