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Mexico's Pemex Halts One-Fifth of Oil Output on Storm (Update4)

By Andres R. Martinez

Oct. 29 (Bloomberg) -- Mexico shut down about one-fifth of its daily crude-oil production, or 600,000 barrels, because of stormy weather in the Gulf of Mexico after rough seas killed more than 20 offshore workers last week.

State oil monopoly Petroleos Mexicanos, the third-largest supplier to the U.S., shut down output of 200,000 barrels at noon New York time yesterday and another 400,000 barrels 12 hours later, company spokesman Carlos Ramirez said in a telephone interview from Mexico City.

Production will resume early tomorrow once ports in the Gulf of Mexico reopen, Ramirez said. The wells should be at full production by the end of the day tomorrow, he said, without elaborating. Mexico pumps about 3.1 million barrels a day, and 82 percent comes from offshore reserves in the Gulf.

``We stopped production because there's no way to move the crude,'' Ramirez said. ``We're not evacuating the platforms. There's no danger for the workers.''

The halt in production from Mexico sent crude-oil prices above $93 a barrel for the first time. Oil futures for December delivery rose $1.59, or 1.7 percent, to $93.45 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange.

Mexico's oil production fell 10 percent in August after Hurricane Dean forced the company to shut offshore operations.

Oct. 23 Storm

At least 21 workers died when a rig hit an offshore platform in the Gulf of Mexico during a storm that produced waves as high as 26 feet (7.9 meters) and wind gusts of 81 miles per hour (130 kilometers an hour) on Oct. 23. Mexican President Felipe Calderon ordered an investigation into whether the accident might have been prevented.

Gale-force winds from a weather system between Florida and the Yucatan peninsula are whipping up 8-foot waves in the Gulf of Mexico, according to the U.S. National Hurricane Center. At least seven commercial ports remained closed in Mexico as of 9 a.m. today, according to a bulletin from the Meteorlogical Service of the Merchant Marine.

``That's pretty strong for the Gulf,'' said David Salmon, a forecaster at Weather Derivatives Inc. in Belton, Missouri. ``It's showery and stormy over the oil-production area. There's probably some nervousness lingering from the last storms they had, as well as strong winds, precipitation and 8-foot waves.''

Rig Accident

Last week's accident was the deadliest in the Gulf of Mexico in 43 years, according to Simon Marquis, a U.K.-based offshore rig researcher. In 1964, an explosion on a C.P. Baker drilling barge killed 22, he said.

The shutdown yesterday happened in the Bay of Campeche, where Petroleos Mexicanos, or Pemex, has about 17,000 workers. Campeche is the same area where the 21 workers died last week. One worker is still missing, Pemex said yesterday.

The stormy weather also prompted Pemex to suspend work to repair oil and fuel leaks resulting from the Oct. 23 accident in the Gulf of Mexico.

There are no named tropical storms in the Gulf, and one near Cuba, called Noel, is expected to twist northwards and avoid the Gulf.

The U.S. Minerals Management Service, a U.S. Interior Department division that manages oil and natural-gas leases in the Gulf, has heard ``nothing at this point'' about any production problems on the U.S. side of the Gulf, spokesman Gary Strasburg said in a telephone interview.

To contact the reporter on this story: Andres R. Martinez in Chicago at amartinez28@bloomberg.net

Last Updated: October 29, 2007 16:51 EDT

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