The damage from Hurricane Katrina has been worse than expected, initial assessments showed yesterday, prompting a rise in oil prices to record levels and raising concerns about the cost of insurance in the Gulf of Mexico.
Industry sources said that one big underwriter had already stopped providing business-interruption insurance in the Gulf and others warned that rising storm losses would lead to premiums so high that insuring platforms could become uneconomic.
Damage assessments yesterday suggested that it could take a week to restart refineries hit by the storm at a time when supplies already are tight.
Nymex crude hit $70.85 (€58), five cents higher than the highest price on Monday, and a new nominal high. Nymex gasoline futures hit a new record of $2.41 a gallon, up 35 cents.
Some companies estimated it might be a week or longer before they resumed refining operations in the area hit by the hurricane that blew through the heart of US oil country Monday.
"If we can put offshore production up again, but we have no refineries, the oil will be worthless," said Adam Sieminski of Deutsche Bank.
The extent of the damage to underwater pipelines and anchoring systems was unknown but the discovery of at least two rigs that had broken their moorings indicated the probable extent of the industry's problems.
Almost 2,800 platforms were in Katrina's path and about 1,100 of them were exposed to hurricane-force winds. Of the 231 exploration rigs, 117 were hit by the storm, according to Rigzone, an industry website.
Insurance companies estimate the damage from Katrina could be $26 billion (€21.3 billion) - almost as much as the total damage from last year's four hurricanes in the Gulf.
International oil companies have become increasingly vulnerable to hurricane losses as they move further offshore into the Gulf of Mexico.
"A lot of underwriters are reviewing their positions in that area, deciding whether they want to write the business or not," said Tim Fillingham, who runs Aon UK's energy practice.
"Prices increased following Hurricane Ivan and the other three hurricanes. I'm sure this will cause another review of the rating levels for that area."
