The Organisation of the Petroleum Exporting Countries (Opec) yesterday offered the world all its extra crude as the US oil industry came under a fresh threat from Hurricane Rita.
Opec delegates backed a proposal to offer consumers two million barrels a day of extra oil, though Iran - the traditional price hawk of the group - insisted the offer would be reviewed at the group's meeting in Kuwait in December.
By early yesterday afternoon in the US crude futures retreated $1.249 to $66.15 after gaining $4.17 on Monday as fears of Hurricane Rita grew. October gasoline futures trading on the New York Mercantile exchange fell 4.77 cents to $2 a gallon.
The oil cartel's negotiations were overshadowed by the threat posed by Hurricane Rita as delegates and traders tried to forecast how much damage it might do to the Texas oil industry.
"We are worried," said Sheik Ahmed Fahd Al-Ahmed Al- Sabah, Kuwait's oil minister. "We are following the hurricane to see what will be the effect, especially in Texas."
Thousands of people in Florida fled Hurricane Rita yesterday as it swept into the Keys, but the storm was expected to do more damage along the Gulf Coast this weekend.
New Orleans was forced to suspend the return of residents who had been evacuated just weeks ago when Hurricane Katrina hit. Kathleen Blanco, Louisiana's governor, urged those in the south-west of the state to prepare to evacuate.
Gulf Coast energy companies evacuated offshore facilities and began to prepare onshore refineries and chemical plants for a possible onslaught, testing emergency equipment and procedures.
Analysts agreed the US energy industry, already strained after the disruptions caused by Hurricane Katrina, could see further fuel price rises if bad weather strikes again at the heart of US energy production.
More than a quarter of the US refining industry, processing 4.5 million barrels a day of crude oil, stands in the path of Hurricane Rita, with three of the country's five largest refineries there.
The area is less prone to flooding than New Orleans, where nearly one million barrels a day of refining capacity remains shut due to damage following Hurricane Katrina.
Traders said yesterday that downed power lines and blocked waterways hindering the movement of crude oil and refined products were a short-term concern.
There are 28 ports in the area under threat from Hurricane Rita.
The Opec decision came as John Snow, the US Treasury secretary, warned that recovery from Hurricane Katrina "will push to the back burner some issues that otherwise would have been on the agenda now - the estate tax, tax permanency, GSEs and other things". - (Financial Times Service)
