As of Wednesday, August 31, 4:00 pm --SEE MOST RECENT--

According to the Minerals Management Service (MMS), as of 11:30 Central Time August 31, Gulf of Mexico oil production was reduced by over 1.371 million barrels per day as a result of Hurricane Katrina, equivalent to about 91.45 percent of daily Gulf of Mexico oil production (which is 1.5 million barrels per day). The MMS also reported that 8.345 billion cubic feet per day of natural gas production was shut in, equivalent to 83.46 percent of daily Gulf of Mexico natural gas production (which is 10 billion cubic feet per day).

Petroleum
Crude oil prices and petroleum product prices have spiked over the last three trading days. As of the close of trading on Wednesday, the NYMEX West Texas Intermediate (WTI) crude oil futures price fell 87 cents per barrel from yesterday's all time high (unadjusted for inflation), settling at $68.94. The gasoline near-month futures price gained 14.0 cents per gallon from yesterday, settling at 261.45 cents per gallon, an all-time high for the near-month closing price (unadjusted for inflation). The heating oil near-month futures price fell 2.29 cents per gallon from yesterday's all time high (unadjusted for inflation), settling at 205.30 cents per gallon.

As of August 26, (the most recent data available), U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.5 million barrels from the previous week. At 321.4 million barrels, U.S. crude oil inventories are well above the upper end of the average range for this time of year. Total motor gasoline inventories declined by 0.5 million barrels last week, putting them near the bottom end of the average range. Distillate fuel inventories increased by 2.7 million barrels last week, and are above the upper end of the average range for this time of year. Total commercial petroleum inventories rose by 2.4 million barrels last week and now stand above the upper end of the average range for this time of year. Total product supplied over the last 4-week period has averaged 21.5 million barrels per day, or 2.3 percent more than averaged over the same period last year.

Impact on Refineries. Unlike 2004's Hurricane Ivan, which affected oil production facilities and had a lasting impact on crude oil production in the Gulf of Mexico, it appears that Hurricane Katrina may have a more lasting impact on refinery production and the distribution system. However, that the news is varied, with some refineries likely able to restart their operations within the next 1 to 2 weeks, while others will likely be down for a more extended period, possibly several months. There are several factors currently inhibiting refinery production (see EIA's This Week in Petroleum).

The U.S. distillate surplus that built up over the last several months will certainly be important as seasonal emphasis shifts to heating oil. While distillate prices will react to crude price and related developments, the more critical near term product problem relates to gasoline.

Ports
On Wednesday, August 31, reports indicated the Louisiana Offshore Oil Port (LOOP) might unload its first tanker cargo since August 27. A pipeline controlled by the port meets the Capline pipeline system in St. James, Louisiana, which connects to refineries. The port has started making deliveries to Exxon Mobil Corp.'s Baton Rouge refinery.

There are conflicting reports about the damage to the port of New Orleans. Damage could impact ethanol flow down the Mississippi River for supply to other regions like the West Coast, which receives a key part of its ethanol supply from here. Europe will provide some support for the United States, likely increasing gasoline exports, although an active turnaround season will also constrain their ability to fully resupply U.S. requirements.

Natural Gas
The natural gas futures price for October delivery was down 19 cents, to reach $11.47 per million Btu as of the close of trading today, Wednesday, 8/31. In trading on the Intercontinental Exchange, the Henry Hub spot price was $12.69 per MMBtu in today's trading, up $0.33 from yesterday (Tuesday) and up $2.84 per MMBtu from last Friday's price. (Owing to the hurricane, trading was suspended at the Henry Hub on Monday.) At market locations across the Gulf region, price increases today ranged up to $4.10 per MMBtu with an average of $0.91 per MMBtu. The overall average change in price was $0.58 per MMBtu.

There are reports that Hurricane Katrina may have damaged key natural gas processing facilities on the Gulf Coast, which could delay a recovery of supplies of the fuel. Even if platforms and pipelines are either unaffected or readily restored to service, the gas generally can't flow to market without treatment. Four plants may have been affected that have a combined capacity of 5.5 Bcf per day, which is the equivalent of almost 10 percent of total national production.

Flows through the Henry Hub were zero during the period from 6 p.m. (Eastern Time) on Sunday until 12:30 p.m. on Monday. Operations presently appear to be around normal. Preliminary assessment of the Henry Hub operations indicates that the Hub avoided significant damage from Hurricane Katrina.

Hurricane Katrina apparently has had little impact on receipts of liquefied natural gas (LNG) shipments at the LNG terminal at Lake Charles, Louisiana. Trunkline LNG, operator of the facility, had shut down operations for maintenance to accommodate expansion tie-ins. The facility was restored to active status ahead of schedule on Sunday. No shipments were scheduled to arrive at Lake Charles during the days affected by Katrina.