Market watch: Gas futures prices decline in profit taking

Sam Fletcher
OGJ Senior Writer
HOUSTON, Dec. 20 -- Energy futures markets were mixed Thursday, with a drop in natural gas prices as a result of profit taking on the New York Mercantile Exchange.

Meanwhile, Petroleos de Venezuela SA Pres. Alí Rodríguez Araque said it will take "a tremendous effort during several years" for Venezuela's economy to recover from the general strike, now well into its third week, that has crippled PDVSA's daily oil production and virtually eliminated current exports of crude and petroleum products.

"A long time will pass before the company recovers, not only from the economic damage, but also from the damage inflicted on Venezuela's oil industry in the international market," Rodríguez said. He reiterated his call for striking PDVSA employees to return to work.

A large majority of PDVSA's employees are participating in the strike that began Dec. 2 to topple Venezuelan President Hugo Chavez. Rodriguez has tried to use retired oil workers, military personnel, and even foreign workers to break the strike. But soldiers failed to restart oil operations because they cannot operate the sophisticated equipment.

As a result, PDVSA's oil production has been slashed to 370,000 b/d, less than 15% of its normal level of some 3 million b/d. PDVSA officials said production is unlikely to fall further because they do not want to cut off basic electric power services in that country.

Meanwhile, Venezuela's oil inventory capacity is nearly full, since virtually all refining and export operations are at a standstill. More than 40 tankers are moored near inactive Venezuelan ports. Oil accounts for nearly a third of Venezuela's gross domestic product, half of the government's income, and 80% of the country's exports, primarily to US markets.

TotalFinaElf SA said it halted almost all of its oil production in Venezuela, except for 2,000 b/d from Jusepin field. That output is continuing just to maintain the mature field's production capability, officials said. Jusepin normally produces 38,000 b/d. But most of that had to be shut in because the gas needed for injection to compensate for the field's natural decline is no longer being delivered, officials said.

The halt of TotalfinaElf's production in both Jusepin and Zuata fields is being used to anticipate work that was scheduled for a later period, said Jean-marie Guillermon, TotalFinaElf's general manager in Caracas.

The January contract for benchmark US light, sweet crudes gained 12¢ to $30.56/bbl Thursday on NYMEX, but the February position lost 24¢ to $30.19/bbl. Heating oil for January delivery increased 0.53¢ to 86.06¢/gal. Unleaded gasoline for the same month was up 0.27¢ to 87.81¢/gal.

The January natural gas contract dropped 23.1¢ to $5.05/Mcf, in what analysts at Enerfax Daily described as "an overbought market falling in a wave of profit-taking."

They said, "The heavy winter premium pumped into the market by speculators, an illiquid market, finally started to show signs of faltering. The market ran out of buyers, so it took profits. It failed to generate new highs, even with a supportive storage withdrawal."

The US Energy Information Administration reported Thursday that 159 bcf of gas was withdrawn from US underground storage during the week ended Dec. 13. That was down from 162 bcf the previous week but up from 42 bcf during the same period last year and well above the consensus of Wall Street analysts.

US gas storage now stands at 2.6 tcf, down 560 bcf from year-ago levels and 151 bcf below the 5-year average. Meanwhile, meteorologists at Salomon Smith Barney Inc. are predicting colder-than-normal weather in most of the central and eastern US in late December and early January.

Salomon Smith Barney analyst Robert Morris said Thursday that the latest bi-annual report by Canada's National Energy Board (NEB) noted that initial productivity from the Western Canada sedimentary basin (WCSB) declined to less than 400 Mcfd per well in 2001 from 600 Mcfd per well in 1996. Average decline rates in first-year production in that area increased to 50% last year from 35% in 1996.

"The NEB estimates that the overall decline rate for current production in the WCSB is 20%/year, although we believe that it could be closer to 25%," said Morris. At either rate, he said, total Canadian exports of natural gas to US markets are likely to drop during the next 2 years. "We estimate that total Canadian imports will decline roughly 3% this year and an additional 4% in 2003," he said.

Morris noted, "The NEB report did not include production from the prolific Ladyfern field, which has already declined 40% from its peak production rate of 650 MMcfd in June. We believe Ladyfern production could exit next year as low as 100-150 MMcfd, or down more than 50% on average in 2003 relative to this year."

In London, the February contract for North Sea Brent crude lost 27¢ to $28.22/bbl on the international petroleum exchange on the International Petroleum Exchange. The January natural gas contract lost 3.4¢ to the equivalent of $3.87/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes increased by 44¢ to $29.56/bbl Thursday.
Contact Sam Fletcher at samf@ogjonline.com

Related Articles

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...

Oil production begins at Nasr Phase-1 offshore Abu Dhabi

02/05/2015 The first phase of Nasr oil field offshore Abu Dhabi will be producing 22,000 b/d by yearend, according to United Arab Emirates news agency WAM.

Woodside lets FEED contract for Greater Western Flank project

02/05/2015 Woodside Petroleum Ltd. has let a contract to Wood Group Kenny for the front-end engineering and design for the flowline system and associated proc...

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

BG’s 2015 budget ‘significantly lower than 2014’

02/03/2015 BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is “significantly lower than 2014” due to “a lower oil...

BP trims capital budget by $4-6 billion

02/03/2015 BP PLC plans an organic capital expenditure of $20 billion in 2015, down from the previous guidance $24-26 billion. Total organic capital expenditu...

IHS sees second-half end of US output surge

02/03/2015

Expectations are moderating about growth of oil production in the US this year.

Gazprom Neft starts shale oil production in western Siberian field

02/03/2015 JSC Gazprom Neft reported start of shale oil production from the Bazhenov formation during tests of two wells in southern Priobskoye field in centr...
White Papers

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...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

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


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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