Sept. 23 (Bloomberg) -- Gasoline and crude oil fell as Hurricane Rita, as strong as Katrina, veered away from the U.S. refining hub near Houston toward eastern Texas, where it may cause less damage to the oil industry when it reaches land tomorrow.

Rita's winds have slowed to 140 miles per hour from as high as 175 mph yesterday, the National Hurricane Center said. About 1.1 million barrels a day of refining capacity are located where the storm is expected to hit, in the Port Arthur area, Societe Generale's Deborah White said. That compares with 2.1 million a day around Houston, where the storm was headed yesterday.

``The market yesterday was pricing a direct hurricane hit into Houston,'' said White, a Paris-based economist. ``The difference now is only half the refining capacity is threatened.''

Gasoline for October delivery fell as much as 3.7 percent to $2.06 a gallon on the New York Mercantile Exchange, where it was down 7.19 cents at 12:34 p.m. London time. Crude oil for November delivery fell as much as 1.5 percent to $65.51 a barrel, and was recently down 79 cents at $65.71.

Gasoline futures have dropped 29 percent from a record $2.92 last month. At the pump, average U.S. prices yesterday fell 0.7 cents to $2.748 a gallon, according to the AAA motorists' group. They reached a record $3.057 on Sept. 2, the week that Hurricane Katrina hit. Crude has declined 7.3 percent from its $70.85 a barrel record on Aug. 30.

Refineries Shut

About 20 percent of U.S. refining capacity has been shut down in Texas this week with Rita's approach. Another 5 percent remains closed because of Hurricane Katrina, which hit Louisiana and Mississippi last month, causing scattered gasoline shortages.

``Refineries near New Orleans were severely affected by flooding and by the difficulty of getting staff back in,'' said John Waterlow, an oil analyst at Wood Mackenzie Consultants Ltd. in Edinburgh. ``The latter could apply in the Houston area, but the flooding side seems less of an issue. Refineries are planned to survive severe weather conditions.''

At least 14 refineries with a combined capacity of more than 3.3 million barrels a day have cut or halted processing in Corpus Christi, Port Arthur and around Houston because of Rita. Texas is home to the biggest concentration of U.S. refineries, accounting for 26 percent of the nation's total capacity.

European stocks advanced, paring their loss for the week as oil prices declined. The Dow Jones Stoxx 600 Index rose 0.3 percent to 291.68 as of 12:18 p.m. in London, as did the Euro Stoxx 50, a benchmark for the 12 nations sharing the euro, and the Stoxx 50.

Next Week's Outlook

Crude oil may rise next week on concern Rita will damage platforms in the Gulf of Mexico and refineries in Texas, a Bloomberg survey showed. Thirty-three of 53 analysts and traders questions or 62 percent, said oil will rise next week. Eleven, or 21 percent, said prices will fall and nine forecast little change.

``The storm usually can deviate quite considerably at the tail- end of its path,'' said Edward Meir, a commodity analyst at Man Financial Ltd. in Darien, Connecticut. ``Irrespective of what happens, the logistical problems will be pretty serious. You may have flooding, you may have damage to the ports, to the terminals, to the storage tanks.''

Rita also closed oil and natural gas platforms across the Gulf of Mexico, hampering the recovery of production from Katrina. About 92 percent of U.S. oil output in the region and 66 percent of the gas was shut yesterday, the Minerals Management Service said. The Gulf accounts for about 30 percent of the nation's oil production and 24 percent of its gas.

``Rita and Katrina are fairly similar storms,'' said Chris Radda, a meteorologist with Weather Services International. ``Rita is moving a bit faster and it appears to be undergoing some weakening. There's still some time for additional weakening before it makes landfall,'' he said, adding that the storm may hit the Port Arthur area.

High Risk

Insurers including Allstate Corp. and St. Paul Travelers Cos. cover an estimated $740 billion of property in Hurricane Rita's path, twice as much as in the three states pummeled by Katrina last month, a storm modeler said.

The insured value of businesses and homes on the Texas coast compares with $330 billion for coastal Louisiana, Mississippi and Alabama, said AIR Worldwide Corp., which uses computers to help insurers gauge risks. The devastation from Katrina may cost insurers as much as $60 billion, another modeler said.

The U.S. government released 30 million barrels of crude from emergency stockpiles to ease shortages in the wake of Katrina. The International Energy Agency released the same amount in a combination of crude and fuel, including gasoline.

``It looks like the highs in crude prices are behind us, because we've got signals from the U.S. government that they are ready to release more supplies,'' Societe Generale's White said. ``We already know that if damage is severe,'' the IEA will also release supplies of fuels.

OPEC's Output

Oil consumption normally peaks in the fourth quarter because refiners build stockpiles of fuel before the northern hemisphere winter. The Organization of Petroleum Exporting Countries is pumping near its capacity as growth in non-OPEC output slows.

``The highs in product prices are also probably behind us,'' White said. ``We are seeing a dramatic slowdown in demand because of high prices.''

OPEC, the source of about 40 percent of the world's oil, agreed at its meeting in Vienna three days ago to effectively suspend its quota system for the first time since the 1991 Gulf War. OPEC estimates its members can pump another 2 million barrels a day. The offer of additional barrels starts Oct. 1 and lasts three months.

Brent crude for November settlement fell 97 cents, or 1.5 percent, to $63.63 a barrel on London's International Petroleum Exchange. It reached a record $68.89 on Aug. 30.

``I think there's a good amount of a fear factor built into prices,'' $4 or $5 a barrel for crude and 20 or 25 cents for gasoline, Man Financial's Meir said. ``If we get a glancing blow from the hurricane, sort of a nuisance in an area where refiners just have to tally up their damages and start operations again, oil markets will definitely sell off.''

To contact the reporter on this story: Alejandro Barbajosa in London at abarbajosa@bloomberg.net;

Last Updated: September 23, 2005 08:06 EDT