Oil prices revived amid reports of damage caused to crude facilities in the Gulf of Mexico by Hurricane Ivan, which reinsurers fear may prove the most expensive of recent storms to hit the US.
Benchmark US crude rose $0.22 a barrel to $44.15 a barrel in Asian trade. Brent crude was $0.32 higher at $41.07.
The increases came as oil companies assessed the damage left by Hurricane Ivan, whose 130 mph winds reached the US coast yesterday after killing 69 people in a ten-day march through the Caribbean.
One Gulf rig has been found, sheared from its moorings, drifting 12 miles from where it was abandoned by its crew ahead as the storm approached. A second rig is missing.
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A report yesterday said that output from the Gulf had fallen last week to 300,000 barrels a day compared with an average of 1.7 million.
The hurricane has also hit oil shipments, exacerbating fears over US inventories, which data this week showed had fallen to a six month low.
Merrill Lynch, the investment bank, said: “We expect this outage to affect oil and natural gas inventory builds over the next few weeks, the loss of production coupled with the disruption to imports offloading in the Gulf being the key factors.”
Refineries have also been shut raising fears for the build up of heating oil supplies as winter approaches.
Ed Silliere, at Energy Merchant LLC, told Reuters: “Even though Ivan was not as bad as we thought, it can take a while to bring back up refineries and there could be lingering damage.”
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Initial insurance assessments estimate that Ivan has left claimable damage of between $2 billion and $7 billion, compared with the combined $11 billion attributed to hurricanes Charley, which struck Florida five weeks ago, and Frances, which hit earlier this month.
However, Ivan promises to be the most expensive of the three for reinsurers as it has caused damage largely in Alabama which, unlike Florida, has no emergency payout fund.
Chris Winans, an analyst at Lehman Brothers, said: “Losses from Charley and Frances are mitigated by state reinsurance in Florida. This time, I would expect more of the losses from Ivan in Alabama to go to reinsurers.”