The early bets on the effect of Hurricane Katrina are rising rapidly this morning as traders are reacting to what is turning out to be the worst-case scenario for the U.S. energy industry
In overnight electronic trading on the New York Mercantile Exchange, October crude-oil futures opened up more than $4 over Friday’s close, topping $70 a barrel for the first time. September gasoline futures were up over 20 cents (over 10%) to around $2.12 a gallon. September natural-gas futures, which expire today, increased by more than $2 (over 22%) to about $12 per million British thermal units. Some energy analysts are predicting the possibility of $80-a-barrel oil and $15 per million British thermal unit natural gas as a result of the storm.

These increases followed a selloff Friday afternoon when it appeared Katrina would move on the eastern part of the Gulf of Mexico and spare oil and gas production and refineries in the central Gulf. Over Friday night, the category 4 hurricane moved on a more westerly course that it through the middle of the oil and gas-producing areas of the central Gulf and the Louisiana refining system, which generates about 15% of total U.S. capacity. The Gulf of Mexico is the source of about a fifth of U.S. gas production and more than a quarter of U.S. oil production.
Three of the key facilities for the Gulf region’s oil and gas production have been shut down by the storm — the Louisiana Offshore Oil Port, the “Superman” facility that receives and distributes imports of crude oil, and Port Fourchon, which supports much of the Gulf’s oil-and-gas production facilities, and the Henry Hub, which is the pipeline nexus for the U.S. natural gas industry and the delivery point for the Nymex futures contracts.
By the way, for an impressive picture loop of Katrina, check out this website. And, unfortunately, longtime New Orleans blawger Ernie the Attorney was not able to get out of New Orleans in time, so he is riding out Katrina in New Orleans.