Oil Plunges as Japan's Refiners Shut Plants After Earthquake

A fire at Cosmo Oil Co. ’s oil refinery in Chiba, outside Tokyo, is spreading, a Fire Department spokesman said. Photographer: Andy Rain/Bloomberg

Oil fell in New York, headed for the first weekly decline in a month, after the world’s strongest earthquake in more than six years struck the northern coast of Japan and forced refiners to shut processing plants.

Futures slipped for a fourth day after the temblor in the world’s third-largest crude user. A fire at Cosmo Oil Co.’s oil refinery in Chiba, outside Tokyo, is spreading, a Fire Department spokesman said. JX Nippon Oil & Energy Corp. shut its refineries in Sendai, Kashima and Negishi. Prices had dropped before the earthquake on speculation the economic recovery in the U.S. may falter.

“Crude had been edging lower since before the earthquake,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “It depends on how long the plants are shut, but if they are shut for an extended period that would reduce demand for crude.”

Crude for April delivery tumbled as much as $1.83, or 1.8 percent, to $101.87 a barrel in electronic trading on the New York Mercantile Exchange. It was at $101.96 at 9:27 a.m. London time. Prices are down 2.4 percent this week.

Brent oil for April settlement on the London-based ICE Futures Europe exchange dropped as much as $2.60, or 2.3 percent, to $112.83 a barrel. The contract has lost 1.9 percent this week and is headed for the first decline in seven weeks.

Japan’s Refineries

Japan was struck by an 8.9-magnitude earthquake off the coast near the city of Sendai at 2:46 p.m. local time. The country was hit by 10 aftershocks, according to the U.S. Geological Survey.

The temblor forced Cosmo Oil to shut its 220,000 barrel-a- day refinery in the city of Chiba, near Tokyo, after a fire started at the facility’s storage tanks, said Yusuke Kanada, a company spokesman. JX Nippon’s three plants that closed have a combined processing capacity of about 600,000 barrels daily.

Japan consumed 4.42 million barrels a day of oil in 2010, according to data from the International Energy Agency’s Feb. 10 Monthly Oil Market Report. China used 9.39 million barrels and the U.S. 19.25 million, the agency said.

Oil fell earlier after the U.S. Labor Department said jobless claims increased by 26,000 to 397,000 last week from a three-year low. Economists forecast they would climb to 376,000, according to the median estimate in a Bloomberg survey.