Sept. 5 (Bloomberg) -- Crude oil fell for a second day in London, erasing gains caused by Hurricane Katrina, after producers including BP Plc resumed output in the Gulf of Mexico and the International Energy Agency pledged to release emergency reserves.

BP said today its Holstein platform in the U.S. Gulf started production. Royal Dutch Shell Plc and Marathon Oil Corp. resumed processing at two refineries in Louisiana during the weekend. Storm disruptions sent U.S. average gasoline pump prices to a record $3.057 a gallon on Sept. 2, the AAA motorists' group said today.

``Prices peaked immediately after the hurricane because nobody had an idea of what the damage would be,'' said Richard Savage, global head of commodities research at Bank of America in London. Traders ``factored in a worst-case scenario. It's difficult to see how things can do anything but improve. Refineries are coming back and the IEA will release reserves of crude and products.''

Brent crude oil for October settlement fell $1.21, or 1.8 percent, to $64.85 a barrel on London's International Petroleum Exchange, the lowest close since Aug. 23. Prices have still gained 60 percent from a year ago, reaching a record $68.89 on Aug. 30, a day after Katrina made landfall.

The New York Mercantile Exchange, the world's largest energy bourse, is closed today for the U.S. Labor Day holiday. October crude oil fell 2.7 percent to $67.57 in New York on Sept. 2, its biggest decline since Hurricane Katrina struck. Oil reached a record $70.85 on Aug. 30, tripling from March 2002.

Government Criticism

Most Americans blame President George W. Bush to some degree for failures in the U.S. government's response to Hurricane Katrina, according to an ABC News and Washington Post survey published yesterday. Seventy-nine percent of 501 adults surveyed by telephone on Sept. 2 criticized the government's response to the nation's reduced oil supply and rising gasoline prices.

Bush last week encouraged energy conservation and called on Americans to save gasoline. Average prices at the pump climbed 17 percent across the U.S. the week ended Sept. 2, according to the AAA, formerly the American Automobile Association.

``Americans should be prudent in the use of gasoline,'' Bush said last week. ``Don't buy gas if you don't need it.''

Gasoline prices at the pump peaked at $1.417 a gallon in March 1981, which adjusted for inflation is equivalent to $3.14 a gallon today. Supplies then were curbed from Iran and Iraq, which were fighting a war against each other.

Unlike crude oil, gasoline pump prices have continued to rise after the IEA statement because of refinery shutdowns. An unspecified amount of the 60 million barrels that will be made available to the market will be oil products, including gasoline, the agency's executive director, Claude Mandil, said today in an interview. The U.S. will contribute 30 million barrels from its strategic petroleum reserve, which only holds crude oil.

Gasoline Concern

``Markets are more concerned about gasoline than crude oil,'' said Mike Wittner, global head of energy market research at Calyon in London, a unit of Credit Agricole SA. ``Gasoline stocks are tight. The danger of potentially more hurricanes exists and markets are going to be jumpy about supplies.''

BP, the world's second-largest oil company, said its Holstein platform usually produces 55,000 barrels of oil per day. Shell, the third-biggest oil company, restarted its Motiva refinery at Convent, Louisiana, and expects to return to full production over several days, the company said on its Web site.

Marathon Oil Corp., the No. 4 U.S. oil company, two days ago said its 245,000 barrel-a-day refinery in Garyville, Louisiana, is expected to be operating at capacity today. As of Saturday, at least five plants near the Gulf coast remain closed, according to the U.S. Energy Department.

Slow Recovery

``Refineries are going to be slow to recover,'' said Kevin Blemkin, a broker with Man Financial in London. ``I'm not too excited about the downside for prices. We still have disruptions. We won't get a real picture of the market today because people are away in the U.S.''

The IEA said on Sept. 2 that it would release 2 million barrels of oil a day from its inventories for the next 30 days to compensate for the disruptions caused by Katrina. Yesterday, 1.2 million barrels a day of Gulf of Mexico output remained shut.

``What we decided was in response to a shortage caused by Hurricane Katrina, in a situation where there was lack of spare capacity, which is much more difficult to offset without the reserve release,'' the IEA's Mandil said in an interview from Paris. ``The prices are a signal, but not the basis for us to decide. We are convinced that they have hurt the economy since last year.''

Refining Capacity

Half the oil in the IEA release will come from the U.S. strategic reserve as crude. The other half will be ``mainly'' oil products, including gasoline, Mandil said. About 20 percent will come from Japan and other Asian countries, 10 percent from Germany, 7 percent from France and 5 percent from Spain, he said.

``The IEA news that they're releasing 2 million barrels a day is positive,'' said Craig Pennington, head energy analyst at Schroders Plc in London. ``They can make available as much crude as they want. But it's the shortage and absence of upgrading refining capacity that produces products like gasoline that is causing the prices to be very, very high.''

The IEA, which advises developed nations on energy policy and includes the U.S., can organize the release of 1.4 billion barrels of oil, owned by member countries. The only other time the reserves have been used was during the Persian Gulf War in 1991.

Economic Growth

Prices may also keep falling as energy costs start to hurt global economic growth. International Monetary Fund Managing Director Rodrigo de Rato said on Sept. 3 that oil prices were an increasing risk to the global economy.

``There's a lag in the effect of high oil prices on growth, but it's going to have an impact across the board,'' Bank of America's Savage said. ``2005 will be a disappointing year for oil demand.''

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world's crude oil, is producing more than the market needs to build stocks and control prices, the group's president, Sheikh Ahmad Fahd al-Sabah, said yesterday.

Hurricane Katrina, which devastated the Mississippi and Louisiana coasts, shut eight oil refineries and reduced output at least 10 others. It also halted most of the 1.5 million barrels a day the U.S. pumps from the Gulf of Mexico.

``There is a clear risk that the sub-sea damage might be greater than anticipated,'' Pennington at Schroders said. ``There could be permanent loss of output. The market will remain concerned that there is simply not enough spare capacity.''

Hurricane Season

Out of the 13 named storms that have developed during this year's Atlantic hurricane season, eight have entered the Gulf of Mexico and five have disrupted oil supplies -- Tropical Storm Arlene, Tropical Storm Cindy, Hurricane Dennis, Hurricane Emily and Katrina.

The Atlantic hurricane season lasts from June through November. This year's season may be more active than normal with 21 tropical storms and 11 hurricanes, according to the U.S. National Oceanic and Atmospheric Administration.

Gasoline for October delivery rose 18 percent to $2.1837 a gallon in New York last week. AAA figures show that average pump prices are 65 percent higher than a year ago.

Friday's average nationwide pump price gained 19 cents from the previous day, according to the AAA. The highest average pump price on Sept. 2 was in Maryland, where it reached $3.26 a gallon. That was followed by Washington D.C., the nation's capital, where it was $3.258. Gasoline is less than $3 a gallon in states including Texas, Alaska, Oregon and Mississippi.

Shell also said today that it resumed production from its Penguin oil and gas field in the North Sea after the position of a drilling rig was secured. It had closed as a precautionary measure because of rough seas, Shell said Aug. 30.

The company's Alpha and Bravo platforms on the Brent field remain shut as Shell continues to investigate and repair an oil spill on Bravo, a spokeswoman said today. They have been shut since Aug. 18.

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

Last Updated: September 5, 2005 13:57 EDT