By the OGJ Online Staff
HOUSTON, Aug. 30 -- US energy futures tumbled Wednesday as the market failed to maintain a short rally sparked by strong demand for gasoline.
The September contract for unleaded gasoline fell 1.49¢ to 83.02¢/gal on the New York Mercantile Exchange, wiping out a combined gain of 0.94¢ in the previous two sessions when traders were bidding up that contract in anticipation of a bullish report on US gasoline inventories.
That report, issued by the American Petroleum Institute after the market closed Tuesday, showed a surprising drop of 6.8 million bbl from US gasoline stocks last week -- more than triple the amount expected by some analysts (OGJ Online, Aug. 29, 2001).
But traders apparently discounted that effect Wednesday with the pending end of the peak summer driving season after the upcoming long Labor Day weekend, analysts said.
They probably were influenced also by the US Environmental Protection Agency's decision to ease temporarily its requirements on reformulated gasoline in order to channel more supplies into the tight Chicago-Milwaukee market (OGJ Online, Aug. 29, 2001). Regional pump prices for gasoline in the Chicago area escalated 20¢/gal last week after a fire knocked out Citgo Petroleum Corp.'s 158,650 b/d Lemont, Ill., refinery.
The October contract for benchmark US sweet, light crudes dipped 12¢ to $27.05/bbl Wednesday on the NYMEX, while the November contract lost 7¢ to $27.14.
Home heating oil for September delivery dropped 0.91¢ to 76.57¢/gal.
The September contract for natural gas continued its decline, losing 12¢ to $2.30/Mcf. At one point during the day, it was trading as low as $2.25/Mcf, the lowest price level for natural gas since April 1999, sources said.
The American Gas Association reported 69 bcf of gas were injected into US underground storage last week. That indicated that the pace of injections has slowed to an adjusted rate of 3 bcfd from the higher rate of 4-5 bcfd that had persisted since mid-May, said Robert S. Morris, energy analyst at Salomon Smith Barney Inc.
Unless a late-summer heat wave increases US demand for natural gas or a hurricane disrupts gas production in the Gulf of Mexico, US storage will total nearly 3.4 tcf of gas by November, up 450-650 bcf from last year, Morris said.
In London, late trading pared some of the day's earlier gains by North Sea Brent crude on the International Petroleum Exchange. Still, the October Brent contract closed at $26.53/bbl, up 6¢ for the day after trading in a range of $26.20-$26.79. The September natural gas contract inched up 1.5¢ to the equivalent of $2.51/Mcf on the IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes rose 37¢ to $25.04/bbl Wednesday.