Crude oil rose for a second day after a platform owned by Mariner Energy Inc. in the Gulf of Mexico was struck by an explosion, bolstering concern that regulations will reduce output in the region.
Oil rebounded after the U.S. Coast Guard reported the blast, which occurred 90 miles off the Louisiana coast. The Obama administration instituted a temporary moratorium on deep- water oil and gas drilling in the Gulf on May 27 in reaction to a BP Plc oil spill, the worst in U.S. history.
“We’re rallying because of the explosion on the oil platform,” said Carl Larry, president of Oil Outlooks and Opinions LLC in Houston. “It’s clear that the government now has the ammunition to move ahead with a drilling moratorium. There will be higher costs and a slowdown in production from the Gulf.”
Crude oil for October delivery rose $1.11, or 1.5 percent, to settle at $75.02 a barrel on the New York Mercantile Exchange. Prices are up 10 percent from a year ago. Futures dropped as much as 80 cents, or 1.1 percent, prior to the platform blast.
Brent crude oil for October settlement rose 58 cents, or 0.8 percent, to end the session at $76.93 a barrel on the London-based ICE Futures Europe exchange.
Thirteen workers were on the platform at the time of the blast. All have been rescued after evacuating into the water, Coast Guard Petty Officer Thomas Blue said in a telephone interview. The platform is burning, he said.
“The explosion reminds folks of the dangers of drilling offshore,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “This may delay the lifting of the moratorium.”
Mariner reported an oil sheen one-nautical mile long by 100 feet wide near the platform, U.S. Coast Guard Petty Officer Bill Colclough said in a telephone interview.
“I’m surprised we’re not higher given that a hurricane is coming and a rig explosion,” said Hamza Khan, an analyst at the Schork Group in Villanova, Pennsylvania. “We rallied yesterday on a really bearish inventory report, so the market’s probably put in a bottom.”
Hurricane Earl bore down on North Carolina with winds of 125 miles (205 kilometers) per hour, prompting coastal evacuations and emergency declarations, while storm warnings were issued in Bermuda as Tropical Storm Fiona advanced. Earl was 245 miles south of Cape Hatteras moving north at 18 mph, the National Hurricane Center said at 2 p.m. Miami time.
Oil in New York climbed 2.8 percent yesterday, the biggest increase in a month, and dropped 3.7 percent on Aug. 31, the most since June 4.
Pending Home Sales
Oil also increased and equities climbed after the National Association of Realtors said that the number of contracts to purchase previously owned houses in the U.S. rose 5.2 percent in July. Initial jobless claims fell by 6,000 to 472,000 in the week ended Aug. 28.
U.S. crude oil stockpiles climbed 3.43 million barrels to 361.7 million last week, an Energy Department report showed yesterday. The increase left supplies 11 percent above the five- year average for the period, according to the department.
“U.S. inventories are pretty enormous,” said Alexander Ridgers, head of commodities at London-based CMC Markets, which handles more than $150 million a day in U.S. crude contracts.
Overall petroleum stockpiles, a combination of oil and fuel inventories, climbed 4.04 million barrels, or 0.4 percent, to 1.14 billion, the highest level since at least 1990, according to yesterday’s report.
Gasoline for October delivery rose 3.25 cents, or 1.7 percent, to settle at $1.9216 a gallon in New York. Heating oil for October climbed 2.12 cents, or 1 percent, to end the session at $2.0623 a gallon, the highest settlement since Aug. 11.
Refineries operated at 87 percent of capacity, down 0.7 percentage point from the prior week, the department said. It was the lowest level since April. Refiners often idle units for maintenance in September and October as gasoline demand falls and before heating-oil use increases.
“Prices will probably come under pressure unless there is a weather disruption,” Mueller said. “It looks like refiners are throttling back on operating rates as the summer driving season comes to an end.”
Oil volume on the Nymex was 673,517 contracts as of 3:17 p.m. in electronic trading in New York. Volume totaled 816,879 contracts yesterday, 31 percent above the average of the past three months. Open interest was 1.31 million contracts, the highest since June 16.