Refinery Explosion Rattles Energy Market

www.kansascity.com Posted on Fri, Feb. 21, 2003 REBECCA GOMEZ Associated Press

NEW YORK - A massive explosion at an ExxonMobil Corp. oil storage facility sent shock waves through an energy market already roiled by fears of war, pushing crude oil prices up more than a dollar in trading Friday. Heating oil and gasoline futures also surged.

The explosion occurred midmorning when a barge stocked with 100,000 barrels of unleaded gasoline was being unloaded at the Port Mobil terminal, a storage facility that holds 2 million barrels of oil products, on the tip of Staten Island. The cause was under investigation.

Prices eased somewhat after analysts and traders realized the loss of gas supplies on the barge and thousands of barrels of heating oil at the terminal in Staten Island would pose only a short-term problem for the Northeast.

"This is two million barrels and that's an important size for Staten Island and the region," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. "Heating oil is extremely tight right now in the East. We can't be losing this quantity at this time."

Even though the barge was carrying gas only, the fire damage makes it nearly impossible to retrieve the heating oil from the facility, hurting regional supplies.

"It could have an effect for a couple of weeks, a little more tightness in heating oil," said Tom Kloza, chief oil analyst with the oil price information service. "Much more significant is whether it's cold in the Northeast in the next few weeks."

The national oil market is not likely to suffer as a result of the fire, analysts said.

Still, crude oil for April delivery rose $1.15 to $35.95 a barrel on the New York Mercantile Exchange, after news reports of the fire. It finished the day at $35.58 a barrel, up 84 cents for the day. Earlier, in London trading, Brent crude from the North Sea finished at $32.27, up 71 cents.

The fire broke out as U.S. crude supplies are already at their lowest level since 1975 and crude, gasoline and heating oil inventories are all below what the industry considers essential for smooth operation, the government reported last week.

The United States has not been getting the massive supplies of imported crude oil from Venezuela because of political turmoil and a nationwide strike there that began in December.

Prices also have been sensitive to worries about a war with Iraq and Middle East oil supplies.

As a result, analysts said, any news about the oil markets will cause rumbles, regardless of the long-term impact.

"There's this heightened effect on the market," Silliere said. "Everybody is ready to jump on the latest news.

Elsewhere on the Nymex, March heating oil contract rose 4.98 cents, or 5 percent, to $1.10 a gallon, while the March unleaded gasoline gained 4.7 cents, or about 5 percent, to trade at $1.01 a gallon. Natural gas for March delivery surged nearly 7 percent, or 44.4 cents, to $6.606 per 1,000 cubic feet.

"The market shot up when they thought it was a refinery fire and perhaps there was some other concerns that it could have been terrorist related," said Kloza.

A fire at an oil refinery, rather than a storage facility, would have had a far greater impact, analysts said. Refineries contain much more oil than terminal facilities, such as the Port Mobil, and they house expensive manufacturing equipment.

One person was killed in the explosion, another was critically injured and a third was missing, officials said.

The destruction of the facility quickly affected wholesale oil prices in local New York markets. In Albany, independent heating oil distributors increased their prices by 7 cents to $1.20 a gallon, said Silliere, who tracks the spot market. Small businesses getting supplies of heating oil Friday morning would have seen a quick pop in prices.

The Port Mobil facility is a vital link to oil supplies for the Northeast. It stores oil products taken off the Colonial pipeline, which brings supplies to the region from refinery centers in Louisiana and Texas. The Port Mobil stores the oil product in tanks, then it is loaded into barges that ferry the gas and heating oil to regional distributors.

The fire knocked the Port Mobil out of commission. "Oil products are trapped there for some time because the only way out is barge and barging capabilities are destroyed," Silliere said.