Crude oil rose 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 68 cents, or 0.9 percent, to $74.59 a barrel at 1:34 p.m. on the New York Mercantile Exchange. Futures dropped as much as 80 cents, or 1.1 percent, prior to the platform blast.
Brent crude oil for October settlement rose 22 cents, or 0.3 percent, to $76.57 a barrel on the London-based ICE Futures Europe Exchange.
Thirteen workers were on the platform at the time of the blast and have all been rescued after evacuating into the water, Coast Guard Petty Officer Thomas Blue said in a telephone interview. The platform is “engulfed in flames,” he said.
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.
Hurricane Earl bore down on North Carolina with winds of 140 miles (225 kilometers) per hour, prompting coastal evacuations and emergency declarations, while storm warnings were issued in Bermuda as Tropical Storm Fiona advanced. Earl was 300 miles south of Cape Hatteras moving north at 18 mph, the National Hurricane Center said at 11 a.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.
“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.”
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.