Crude oil and gasoline prices eased yesterday as Hurricane Rita lost some intensity and hopes built that Texas refineries would escape catastrophic damage.
But with almost 30 per cent of US refining capacity shut along the Gulf coast and gasoline stocks low, crude oil, at almost $66 a barrel, is still near its record high.
The International Energy Agency (IEA) said it could order another release of emergency crude, gasoline and heating oil reserves, the second in a month, to help the hurricane-battered US.
"We are on alert," IEA chief, Claude Mandil, said.
The Paris-based agency will meet on Saturday to assess damage wrought by Rita. The IEA, which groups the world's industrialised nations, sprang into action early this month releasing fuel after Hurricane Katrina struck the US Gulf Coast.
US light crude was down $1.40 at $65.10 a barrel yesterday afternoon. London Brent crude was off $1.50 to $63.10.
The US National Hurricane Center expects Rita to move towards the northwest for the next 24 hours, which would put the core "over the southwestern Louisiana and upper Texas coasts late today or tonight". Texas oil refining centres are in Galveston, Houston and Corpus Christi.
"Rita is a very powerful hurricane in the wrong place from an oil industry point of view," said Barclays Capital.
"Even in the event of there being little damage, the scale of the shut-ins, and the days required to bring everything back up, are enough to make a significant difference to US oil product balances."
Gasoline futures fell 7.94 cents to $2.0600 a gallon. Royal Dutch Shell said its stations in the Houston area had run dry as thousands of people fled.
The US department of energy is ready to loan oil from its strategic petroleum reserve (SPR) as it did after Katrina, but it has few resources to deal with a refined products shortage.
"There isn't a shortage of crude. The problem is gasoline," said oil consultant Geoff Pynne.
Fifteen refineries have shut their operations in preparation for Rita, the energy information administration said. Four refineries remained offline in the wake of Hurricane Katrina, which slammed into Louisiana and Mississippi in late August.
"The total amount of refinery capacity shut down amounts to nearly five million barrels per day," EIA, the Energy Department's analytical arm, said in its latest hurricane update.
A United Nations weather expert said there could be a record number of ferocious storms over the Atlantic this year, fuelled by a rise in sea temperatures. Rita is the 17th named storm so far, with two months of the hurricane season to go.
"The last time we had 21 named storms was in 1933," said Nanette Lombarda of the World Meteorological Organisation.
Almost 92 per cent of offshore oil output, or 1.4 million barrels per day is out of action in the Gulf of Mexico, the US minerals management service said. Almost 66 per cent of gas output, or 6.6 billion cubic feet, is also down.
Analysts warned that any damage to natural gas facilities could boost prices because reduced supplies would be far more difficult to replace than lost crude and could spur additional demand for heating oil and utility fuel oil.
The threat of supply disruption also hung over Nigeria, where armed militants are targeting oil facilities to demand the release from jail of a militia leader. The militants have threatened to blow up pipelines and platforms in the world's eighth-biggest crude exporter and a key supplier to the United States.
