Market watch: Crude futures prices decline as war premium wanes

Sam Fletcher
OGJ Senior Writer

HOUSTON, Oct. 9 -- Crude futures prices declined Tuesday in New York and London as traders continued whittling away the perceived "war premium" on oil, despite a sharp drop in US inventories to an 18-month low after two storms recently disrupted production in the Gulf of Mexico.

The US Minerals Management Service reported gulf production totaling 237,275 b/d of oil and 1.7 bcfd of natural gas was still shut in Tuesday, although no major damage to offshore production facilities was reported in the wake of Tropical Storm Isidore or Hurricane Lili.

Following the close of trade Tuesday, the American Petroleum Institute reported US oil stocks fell by 2.6 million bbl to 273.3 million bbl last week, when Lili forced the evacuation of offshore crews from the central gulf off Louisiana.

With the Louisiana Offshore Oil Port also shut down most of last week by the storm, US oil imports dropped more than 1 million b/d to 7.7million b/d. US refineries were operating at 84.7% utilization during the week as a result of the fall off of imports and disruption of some Gulf Coast units. That was down from 91.5% utilization the previous week and 92.8% during the same period last year.

As a result, US gasoline production dropped by 399,000 b/d to 8.3 million b/d last week, while total distillate production fell 293,000 b/d to 3.3 million b/d. US gasoline inventories fell by 3.6 million bbl to 206 million bbl last week, and total distillate stocks dropped 2.4 million bbl to 127.6 million bbl.

That put total US crude and petroleum product inventories at an 18-month low, "in part reflecting the tightening of stocks globally," Matthew Warburton at UBS Warburg LLC, New York, reported Wednesday.

Even a 1.1 million bbl drop in US demand for crude last week "only partially offset curtailment of (gulf) crude production (estimated at 1.5 million b/d at its peak) and suspended tanker unloading at LOOP," he said. US crude inventories now are at their lowest level in 20 years, while US refinery utilization is at its lowest point since February 2000, said Warburton.

"We expect refining utilization to recover once the effects of the recent weather disruptions have passed," he said. "However, this is also likely to limit any reversal of crude inventories. The recent widening of light (vs.) heavy crude spreads with rising OPEC-10 production should also provide incentive for incremental crude demand from US-based complex coking refineries."

Although a large drop in US inventories was expected, the November contract for benchmark US light, sweet crudes retreated 16¢ to $29.48/bbl Tuesday on the New York Mercantile Exchange, while the US Congress debated President George W. Bush's request for authority to take military action against Iraq. The December contract was down 13¢ to $29.51/bbl.

Home heating oil for November delivery lost 0.11¢ to 79.05¢/gal. However, unleaded gasoline for the same month gained 1.88¢ to 82.35¢/gal.

The November natural gas contract rose 12.2¢ to $3.86/Mcf Tuesday on NYMEX, in the process "crossing major technical trend-lines as locals and non-commercial speculators rushed in to buy," analysts at Enerfax Daily reported Wednesday. "The market opened up and continued higher for most of the morning, but lost momentum just before noon and slipped lower for most of the afternoon, before rallying again just before close. Concerns about production outages from Hurricane Lili pushed up spot prices, helping boost the NYMEX early."

In London, profit taking caused futures prices for North Sea Brent to slip temporarily below $28/bbl, briefly touching a 3-week low in Tuesday afternoon trading on the International Petroleum Exchange. However, the November Brent contract recovered to $28.09/bbl, down 14¢ for the day in relatively quite, range-bound trading. The November natural gas contract lost 4¢ to the equivalent of $3.10/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes dropped 25¢ to $27.98/bbl Tuesday.

Contact Sam Fletcher at samf@ogjonline.com


Related Articles

Pemex cuts budget by $4 billion

02/18/2015 The board of Petroleos Mexicanos (Pemex) has approved a $4-billion budget reduction for 2015, an 11.5% decrease compared with the previous expendit...

Pemex lets contract for Salamanca refinery amid budget cuts

02/18/2015 Mexico’s Petroleos Mexicanos (Pemex), through a contractor, has let a contract to SENER Ingeniería y Sistemas SA, Mexico City, a division of SENER ...

Magnum Hunter slashes budget by 75%

02/18/2015 Magnum Hunter Resources Corp., Houston, plans a $100 million upstream capital expenditure budget for 2015, down from the $400 the company planned f...

Gulf Coast Western buys interest in Smackover acreage in South Alabama

02/18/2015 Gulf Coast Western LLC (GCW), Dallas, has acquired a large working interest in a block of leases covering 29,000 acres in Conecuh and Covington cou...

BP Energy Outlook projects global energy demand to jump 37% by 2035

02/17/2015 Global demand for energy is expected to rise by 37% from 2013 to 2035, or by an average of 1.4%/year, due in large part to ongoing economic expansi...

Devon reduces capital budget by 20% in 2015

02/17/2015 Devon Energy Corp., Oklahoma City, plans an exploration and production capital budget of $4.1-4.4 billion in 2015, representing a 20% decline compa...

Uganda taps Russian firm to build country’s first refinery

02/17/2015 The government of Uganda has selected a consortium led by Russia’s RT Global Resources, Moscow, as its first choice to construct the country’s firs...

Phillips 66 Partners to buy pipeline systems’ interests for $1 billion

02/16/2015 Phillips 66 Partners LP has reached agreement with Phillips 66 to acquire Phillips 66’s interests in three pipeline systems for a total of $1.01 bi...

BLM decision clears way for first NPR-A federal oil production

02/16/2015 The US Bureau of Land Management issued a record of decision (ROD) for the proposed Greater Mooses Tooth One project (GMT1), which cleared the way ...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected