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Gulf Energy Production Slow to Return After Gustav

Oil and natural gas production in the Gulf of Mexico continued to recover slowly in the wake of Hurricane Gustav on Friday as a second fierce storm threatened to enter the energy-rich region next week.

Some 90.5 percent of U.S. Gulf oil production and 79.8 percent of its natural gas production remained shut as of 11:30 a.m. Central Time, from 95.2 percent and 87.5 percent respectively on Thursday, the Minerals Management Service said in a report.

"The slow going recovery rate in the U.S. Gulf of Mexico may be reflecting operators' caution in bringing back their personnel or otherwise putting their rigs back into operation as they are still determining whether Hurricane Ike is going to hit the Gulf,'' said Gene McGillian, an analyst at Tradition Energy, Stamford, Connecticut.

Hurricane Ike, a fierce Category 3 storm on the five step Saffir Simson scale, was spinning about 425 miles north of the Leeward Islands Friday on a track that could take it into the eastern Gulf of Mexico by next Wednesday, according to the National Hurricane Center.

The Gulf of Mexico has a capacity to produce 1.3 million barrels per day of oil, about a quarter of total domestic production, and 7.4 billion cubic feet per day of natural gas, about 15 percent of domestic production.

The cumulative production losses from Hurricane Gustav so far has reached some 8.6 million barrels of crude oil—more than a third of what the United States consumes in a day—and 42.3 billion cubic feet of natural gas.

Oil Refinery in California
Oil Refinery in California

In contrast, refineries seemed to be making a quicker recovery from Gustav, with only seven plants, representing 6.2 percent of U.S. fuel production capacity, still shut. At the peak of the storm's impact, 15.2 percent of total U.S. refining capacity was shut by Gustav.

Gulf refiners reported that although they emerged unscathed from Gustav, most downed refineries were waiting for reliable power supplies to be restored.

Gustav was the first big hit to U.S. energy supplies since 2005, when hurricanes Katrina and Rita wrecked 100 offshore oil rigs and flooded several key refineries, sending energy prices to then-record highs.

Energy experts said U.S. fuel stockpiles appeared high enough this time around to compensate for a temporary reduction in nationwide production, particularly as energy demand shrinks under the weight of high prices and a soft economy.

Oil prices fell $1.66 on Friday to $106.23 a barrel.