Oil and gasoline prices were now lower than before hurricanes Katrina and Rita hit the Gulf of Mexico, but the disruption might cut forecast third-quarter growth of the US economy by one percentage point, the IEA said in its monthly report.

Hurricane damage closed off 1.2 million barrels per day of oil production in the US Gulf region in September, the International Energy Agency said. The hurricanes had a "substantial" effect on reducing demand.

"There are indications that the US economy took a hit in September as job losses mounted in hurricance-struck areas and overall US confidence dropped," the report said.

"As a consequence, third-quarter gross domestic product growth may be revised down by as much as one percent versus pre-hurricane projections.

"Looking forward, however, an economic rebound is expected as rebuilding begins and the latest data suggest that US manufacturing activity continues to grow."

US demand for oil products fell by an estimated 2.3 percent in September on a 12-month comparison and demand for gasoline fell by 2.4 percent

The IEA reduced its forecast for growth of global oil demand this year by 90,000 barrels per day to 1.26 million barrels per day.

In 2006 demand would grow by 1.75 million barrels per day owing to a rebound from "the largely temporary impact of Katrina and Rita and a recovery in Chinese demand".

The report said in a passage headlined "flexibility in the system" that "the oil market appears to have adjusted rapidly to the hurricanes".

So far, "strong market forces, the IEA stock release and policy action have combined to mitigate a significant supply disruption".

However, many conditions had to be met for the market to compensate for a cut in production of oil and oil products. "If holes appear in the market, then policy makers may need to offer a further helping hand," the IEA said.

The agency published monthly revisions of supply and demand forecasts which gave a broadly reassuring picture in the context of what it described as "severe damage" to upstream infrastructure and "inoperable" pipelines, processing plants, terminals and refineries.

World oil supply in September fell by an average 845,000 barrels per day to 83.8 million barrels per day. The problems in the US Gulf caused the IEA to revise down its estimate of supplies from the non-OPEC area this year and next by 300,000 to 400,000 barrels per day.

However, total production outside the area covered by the Organization for Petroleum Exporting countries would grow by 170,000 barrels per day in 2005 and by 1.3 million barrels in 2006.

Production by OPEC rose by 100,000 barrels per day in September to 29.8 million barrels per day owing to increased production by Iraq and Kuwait.

However, OPEC spare capacity remained less than 2.0 million barrels per day. The IEA commented: "OPEC attempts to make this available may be frustrated by a lack of demand for heavy, sour crude."

But OPEC capacity should increase by 500,000 barrels per day by the end of this year and by more in 2006.

Stocks of oil held in the area covered by the Organisation for Economic Cooperation and Development fell by 3.5 million barrels per day in August. But overall stockpiles of oil "were little changed" owing to "offsetting moves in Europe and North America".

A drawn-down from stocks of gasoline had been largely balanced by an increase of distillate inventories. Industrial stocks represented 54 days of future demand. This was unchanged from the figure for August and was two days more than in September of 2004.

Related Links
SpaceDaily
Search SpaceDaily
Subscribe To SpaceDaily Express